1998

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[x]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the fiscal year ended January 2, 1999.

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
     EXCHANGE ACT OF 1934

     For the transition period from ______________ to _______________.

                        Commission File Number 001-04710

                               WHITMAN CORPORATION

             (Exact name of registrant as specified in its charter)

            Delaware                                  36-6076573
----------------------------------       ---------------------------------------
 (State or other jurisdiction of         (I.R.S. Employer Identification Number)
  incorporation or organization)

3501 Algonquin Road, Rolling Meadows, Illinois                 60008
----------------------------------------------               ----------
   (Address of principal executive offices)                  (Zip Code)

        Registrant's telephone number, including area code (847) 818-5000

           Securities registered pursuant to Section 12(b) of the Act:

     Title of each class               Name of each exchange on which registered
-------------------------------        -----------------------------------------
Common Stock, without par value                 New York Stock Exchange
                                                Chicago Stock Exchange
                                                Pacific Stock Exchange
Preferred Share Purchase Rights                 New York Stock Exchange
                                                Chicago Stock Exchange
                                                Pacific Stock Exchange

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during the  preceding  12 months and (2) has been  subject to such  filing
requirements for the past 90 days. Yes [x] No [ ]

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

     As of March 11, 1999, the aggregate market value of the registrant's common
stock  held by  non-affiliates  was  $1,591.1  million.  The number of shares of
common stock outstanding at that date was 91,260,659 shares.
<PAGE>
                                     PART I

Item 1.  BUSINESS.

General

     Whitman  Corporation  ("Whitman"  or the  "Company")  through its principal
operating  company,  Pepsi-Cola  General Bottlers,  Inc. ("Pepsi  General"),  is
engaged in the production and  distribution  of Pepsi-Cola  brand products and a
variety of other  non-alcoholic  beverage  products.  Pepsi General accounts for
about  12  percent  of all  Pepsi-Cola  products  sold in the U.S.  It  serves a
significant portion of a twelve state region,  primarily in the Midwest,  with a
population of  approximately  25 million people.  In the last four years,  Pepsi
General  has more  than  doubled  its  potential  market  by  signing  exclusive
franchise agreements with PepsiCo, Inc. ("PepsiCo") for the northern and western
half of Poland during 1994, for the northwest  portion of Russia,  including St.
Petersburg,  at the end of 1996, and for Belarus and the Baltic states (Estonia,
Latvia and Lithuania) in 1997.

     In 1987,  Whitman  entered into an agreement with PepsiCo  whereby  PepsiCo
contributed  cash and  assets in  exchange  for a 20 percent  interest  in Pepsi
General.  While Pepsi General  manages all phases of its  operations,  including
pricing  of  its  products,  Pepsi  General  and  PepsiCo  exchange  production,
marketing and distribution  information,  benefiting both companies'  respective
efforts to lower costs, improve productivity and increase product sales.

     On January 25, 1999, Whitman announced that its Board of Directors approved
a new business relationship with PepsiCo,  including the Contribution and Merger
Agreement (the "Agreement"),  which is subject to shareholder approval. See Note
19,  Proposed  New  Business  Relationship  with  PepsiCo,  to the  Consolidated
Financial  Statements.  The approved  transaction  would result in Pepsi General
selling its franchises in Marion, Virginia, Princeton, West Virginia and the St.
Petersburg  area  of  Russia  to  PepsiCo.  Territories  to  be  acquired  by or
contributed  to Pepsi General would  include  domestic  franchises in Cleveland,
Ohio, Dayton,  Ohio,  Indianapolis,  Indiana,  St. Louis,  Missouri and southern
Indiana, and foreign franchises in Hungary, the Czech Republic, Slovakia and the
balance of Poland.

     The  Company  was  previously  engaged  in the  refrigeration  systems  and
equipment business conducted through Hussmann  International,  Inc. ("Hussmann")
and in the automotive  services  business  through  Midas,  Inc.  ("Midas").  On
January 30, 1998,  the Company  distributed  to  shareholders  all of the common
stock of Hussmann and Midas in tax-free spin-offs.

Forward-Looking Statements

     This  annual   report  on  Form  10-K  contains   certain   forward-looking
information that reflects management's expectations,  estimates and assumptions,
based on  information  available at the time this Form 10-K was  prepared.  When
used in this document, the words "anticipate,"  "believe," "estimate," "expect,"
"plan",   "intend"   and   similar   expressions   are   intended   to  identify
forward-looking  statements.  Such  forward-looking  statements  involve  risks,
uncertainties  and other  factors  which may cause  the  actual  performance  or
achievements of the Company to be materially  different from any future results,
performance  or  achievements  expressed  or  implied  by  such  forward-looking
statements, including, but not limited to, the following: competition, including
product and pricing  pressures;  changing trends in consumer tastes;  changes in
the Company's  relationship and/or support programs with PepsiCo and other brand
owners; market acceptance of new product offerings; weather conditions; cost and
availability  of raw  materials;  availability  of capital;  labor and  employee
benefit costs;  unfavorable interest rate and currency fluctuations;  unexpected
costs  associated  with Year 2000  conversions or the business risks  associated
with  potential  Year  2000  non-compliance  by the  Company,  customers  and/or
suppliers;  costs of legal  proceedings;  and  general  economic,  business  and
political  conditions  in  the  countries  and  territories  where  the  Company
operates.

     These  events and  uncertainties  are  difficult or  impossible  to predict
accurately  and many are beyond the Company's  control.  The Company  assumes no
obligation to publicly  release the result of any revisions  that may be made to
any forward-looking statements to reflect events or circumstances after the date
of such statements or to reflect the occurrence of anticipated or  unanticipated
events.

Marketing and Distribution

     Pepsi  General's  business is seasonal  and subject to weather  conditions,
which have a significant  impact on sales.  In the United States,  Pepsi General
sells it  products  across a  significant  portion  of a  twelve  state  region,
including:  Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Missouri, Ohio,
Tennessee,  Virginia,  West  Virginia and  Wisconsin.  As part of its  long-term
strategy,  Pepsi General will seek to acquire  additional  domestic  franchises,
principally in the Midwest.

     In 1998,  approximately  86  percent  of Pepsi  General's  actual  physical
("raw")  domestic case volume was from  Pepsi-Cola  brand  products,  including:
Pepsi,  Diet Pepsi,  Pepsi One,  Caffeine Free Pepsi,  Caffeine Free Diet Pepsi,
Wild Cherry  Pepsi,  Diet Wild Cherry  Pepsi,  Mountain  Dew, Diet Mountain Dew,
Caffeine Free Mountain Dew,  Storm,  Slice  products,  Mug Root Beer,  Mug Cream
Soda,  All-Sport and Aquafina still water.  Pepsi General also distributes other
brands,  including:  Dr Pepper,  7Up, Sunny Delight,  Hawaiian Punch,  Seagram's
mixers,  Ocean Spray,  Lipton Tea,  Frappuccino  and Avalon spring water,  which
account for the remaining 14 percent of volume.

     In  each  market,   Pepsi   General  sells   approximately   320  different
brand/package  combinations  through its three major channels:  take-home,  cold
drink and fountain. The take-home segment includes  supermarkets/grocery stores,
convenience stores, gas stations, mass merchandisers,  membership clubs and drug
stores.  The  supermarkets/grocery  stores  channel,  where Pepsi General is the
market share leader in its territories, accounts for approximately 45 percent of
total  domestic  raw case  volume,  but it is also the  most  price  competitive
channel.  The cold drink channel includes vending machines and coolers. The full
service  vending  channel  has the  highest  gross  margin  of any  distribution
channel,  because it eliminates  the  middleperson  and enables Pepsi General to
establish  the  retail  price.  Pepsi  General  owns a majority  of the  vending
machines used to dispense its products and will  continue to invest  extensively
in vending  machines,  specifically  those  dispensing  20-ounce  non-returnable
("NR")  bottles.  The fountain  segment  includes  fast-food  accounts and other
restaurants,  hotels,  hospitals,  movie theaters and other commercial accounts.
Pepsi General will continue to aggressively pursue fountain opportunities.

     Volume growth has  historically  come from the supermarkets  sector,  where
competition  is intense.  Pepsi General has recently begun to focus on obtaining
more of its growth from higher margin channels,  such as convenience stores, gas
stations, vending machines and food service providers.

     The majority of Pepsi  General's  products are  distributed  by route sales
people to retail outlets by truck. Pepsi General operates more than 1,350 routes
in its 12  domestic  sales  divisions,  109 routes in  Poland,  and 41 routes in
Russia and the Baltics.  Pepsi  General's  fleet  includes  approximately  3,800
vehicles,  the majority of which are owned. For several years, Pepsi General has
been expanding its bulk distribution system, Pepsi Express, for larger customers
in an effort to improve productivity.

New Products

     During 1998, Pepsi General  continued to expand its product lines by adding
Storm in certain  test  markets.  The addition of Storm is expected to provide a
competitive entrant in the lemon/lime category. In addition, Pepsi General added
Pepsi One, a new Pepsi brand diet cola, in the fourth quarter of 1998.

     As part of its long-term  strategic  goal to transform  itself into a total
beverage company and grow faster than the industry,  Pepsi General will continue
to  identify  new  products,   principally  in  its  international  markets,  to
compliment its existing product offerings.  However, the Company is precluded by
agreement from adding new products  which compete  directly with Pepsi and other
franchised product offerings.

International Expansion

     In May,  1994,  Pepsi General  established  a joint venture with  PepsiCo's
existing  manufacturing  operations  in  Poland  and  entered  into a  franchise
agreement  giving it the exclusive right to distribute  products in the northern
and western regions of Poland.  These distribution rights cover about 40 percent
of the population, a market of approximately 16 million people.

     On  December  31,  1996,  Pepsi  General  acquired  the  assets  of the St.
Petersburg,  Russia  franchise  from  PepsiCo,  which  permits  Pepsi General to
produce and distribute  Pepsi-Cola brand products in St. Petersburg,  as well as
the surrounding area in the northwest region of Russia,  including  Kaliningrad.
In 1997, Pepsi General also acquired franchise rights for Belarus and the Baltic
countries of Estonia, Latvia and Lithuania. Distribution in the Baltic countries
began during the first quarter of 1997.  Pepsi General  currently serves markets
totaling  nearly 40 million people in Russia and Eastern  Europe,  compared to a
market of 25 million people in the U.S.

     By the end of 1998, Pepsi General had invested  approximately  $193 million
in Eastern Europe, including Russia and the Baltics.

     The  Company  has  experienced  operating  losses in Poland each year since
beginning  operations  in  1994.  In  spite of  unusually  cold and wet  weather
conditions  that  adversely  affected sales in 1998,  Pepsi General  reduced its
losses in Poland by 6.8% from $8.1 million in 1997 to $7.5 million in 1998 as it
cut costs and shifted its focus to higher margin products.  Operations in Russia
and the Baltics were negatively  impacted by the Russian  economic  crisis.  The
international  territories  to be acquired from PepsiCo,  net of the sale of the
St. Petersburg franchise,  are expected to increase the losses to be incurred in
1999.

Bottling Contracts

     Pepsi General  conducts its business  primarily  under bottling  agreements
with PepsiCo.  These contracts give Pepsi General  exclusive  rights to produce,
market and distribute  Pepsi-Cola  products in authorized  containers and to use
the related  trade names and  trademarks  in the  specified  territories.  These
franchises   require  Pepsi  General,   among  other  things,  to  purchase  its
concentrate  requirements solely from PepsiCo, at prices established by PepsiCo,
and to promote diligently the sale and distribution of Pepsi brand products.

     Pepsi  franchise  agreements in the United States are issued in perpetuity,
subject to  termination  only upon  failure to comply  with their  terms.  Pepsi
General has similar  arrangements  with other companies whose brands it produces
and distributes.

     Pepsi franchise  agreements outside the United States are for fifteen years
in duration. Pepsi General expects these agreements to be renewed prior to their
termination.  Commencing with the completion of the Agreement with PepsiCo,  the
franchise  agreements  outside the United States will be granted in  perpetuity,
subject to certain performance criteria.

Advertising

     Pepsi  General  obtains  the  benefits of  national  advertising  campaigns
conducted by PepsiCo and the other beverage  companies  whose products it sells.
Pepsi  General   supplements   PepsiCo's  national  ad  campaign  by  purchasing
advertising in its local markets, including the use of television,  radio, print
and billboards. Pepsi General also makes extensive use of in-store point-of-sale
displays to  reinforce  the  national  and local  advertising  and to  stimulate
demand.

Raw Materials

     Excluding its water products, virtually all of Pepsi General's products use
concentrates,   which  are   supplied  by  the   franchisors.   In  addition  to
concentrates,  Pepsi  General  purchases  sweeteners  (e.g.,  fructose),  carbon
dioxide,  cans,  plastic  bottles,   closures  and  other  packaging  materials,
including  cardboard,  for use in the production and packaging of Pepsi-Cola and
other  non-alcoholic  beverages.  All  raw  materials  and  supplies,  excluding
concentrates,  are purchased from multiple  suppliers.  The packaging  materials
(bottles,  cans, caps, closures,  cartons and cases) are obtained from suppliers
approved by the franchisors. Pepsi General obtains water for use in the domestic
production process from publicly available sources.

     Pepsi General negotiates contracts for its sweetener and packaging material
requirements to minimize  fluctuations  in costs and ensure the  availability of
those  materials and  supplies.  The Company has entered into  contracts,  which
include a significant  portion of its expected  requirements  in 1999, for cans,
plastic bottles, fructose and cardboard. A portion of the requirements for cans,
plastic  bottles  and  fructose  are subject to price  fluctuations  under these
contracts  based on  commodity  price  changes  in  aluminum,  resin  and  corn,
respectively.

     The  inability of suppliers to deliver  concentrates  or other  products to
Pepsi  General  could  adversely  affect  operating  results.  None  of the  raw
materials or supplies  currently in use are in short  supply,  although  factors
outside  of the  control  of Pepsi  General  could  adversely  impact the future
availability of these supplies.

Competition

     Americans  consume  more soft  drinks  than any other  beverage,  including
water.  Competition  among soft drinks of all types is intense,  particularly in
the principal cola drink market which accounts for  approximately  60 percent of
the total soft drink market.  The  carbonated  soft drink market is dominated by
Pepsi-Cola and Coca-Cola with a combined estimated market share of approximately
75 percent in 1998.  Other major brands  include Dr Pepper,  7Up and Royal Crown
Cola.

     The non-alcoholic  beverage business is also extremely  competitive.  Pepsi
General  competes  with  many  forms of  commercial  beverages  in  addition  to
carbonated soft drinks, such as coffee, coffee drinks, tea, tea drinks,  juices,
juice drinks,  milk,  milk drinks and bottled water.  The principal  competitive
factors in the carbonated soft drink industry are price,  brand  recognition and
brand image. In the carbonated soft drink category the principal  competition is
Coca-Cola brand products.

Employees

     Whitman  employed  6,526  people  worldwide  as of January  2,  1999.  This
included  5,602  active  employees  in its  domestic  operations  and 924 people
employed  in its  international  operations.  Employment  levels are  subject to
seasonal variations.  The Company is a party to collective bargaining agreements
covering approximately 3,000 employees. Twelve agreements covering approximately
565  employees  will be  renegotiated  in 1999.  Whitman  regards  its  employee
relations as generally satisfactory.

Government Regulations

     Pepsi  General's  domestic  production and marketing,  including  container
labeling, are subject to the rules and regulations of the United States Food and
Drug  Administration and other federal,  state and local governmental  agencies.
State rules and regulations include beverage container deposit laws in Michigan,
Iowa and the city of Columbia,  Missouri.  While the Company  actively  supports
environmental and anti-litter  programs, it also attempts to mitigate any impact
resulting  from the enactment of rules and  regulations  regarding  deposits and
restrictive  packaging  which, if enacted,  could adversely affect the operating
results of the Company.

Environmental Matters

     Whitman  maintains  a  continuous  program to  facilitate  compliance  with
federal,  state and local laws and  regulations  relating  to the  discharge  or
emission  of  materials  into,  and other laws and  regulations  relating to the
protection of, the environment. The capital costs of such compliance,  including
the costs of the  modification  of existing  plants and the  installation of new
manufacturing  processes  incorporating  pollution control  technology,  are not
material.

     Under the agreement  pursuant to which Whitman sold Pneumo Abex Corporation
in 1988 and a subsequent  settlement  agreement entered into with Pneumo Abex in
September,  1991,  Whitman has assumed  indemnification  obligations for certain
environmental  liabilities  of Pneumo  Abex,  net of any  insurance  recoveries.
Pneumo  Abex has been and is  subject  to a number of  federal,  state and local
environmental cleanup proceedings, including proceedings under the Comprehensive
Environmental  Response,  Compensation  and Liability Act of 1980  ("CERCLA") at
off-site locations involving other major corporations which have also been named
as potentially  responsible  parties ("PRPs").  Pneumo Abex also has been and is
subject to private  claims and several  lawsuits for  remediation  of properties
currently or previously owned by Pneumo Abex, and Whitman is subject to two such
suits.

     There is significant uncertainty in assessing the total cost of remediating
a given site and in determining any individual  party's share in that cost. This
is due to the fact that the Pneumo Abex  liabilities are at different  stages in
terms of their ultimate  resolution,  and any assessment and  determination  are
inherently  speculative  during  the early  stages,  depending  upon a number of
variables  beyond the  control of any party.  Additionally,  the  settlement  of
governmental  proceedings or private claims for remediation  invariably involves
negotiations  within  broad cost  ranges of possible  remediation  alternatives.
Furthermore,  there are significant  timing  considerations in that a portion of
the expense incurred by Pneumo Abex, and any resulting  obligation of Whitman to
indemnify Pneumo Abex, may not be expended for a number of years.

     In 1992, the United States Environmental Protection Agency ("EPA") issued a
Record of Decision  ("ROD")  under the  provisions  of CERCLA  setting forth the
scope of  expected  remedial  action at a Pneumo Abex  facility  in  Portsmouth,
Virginia.  The EPA has estimated that the cost of the remedial action  necessary
to comply  with an  Amended  ROD,  issued in 1994,  will total $31  million.  In
January,  1996,  Pneumo Abex executed a Consent  Decree with the EPA agreeing to
implement  remediation of areas associated with the former  Portsmouth  facility
operations.  Based  upon an  analysis  of the  various  agreements  subsequently
negotiated with contractors to perform the ROD, Whitman  management is confident
that the cost of  implementation  of the remedy  required by the Consent  Decree
will be significantly less than the estimated cost set forth in the Amended ROD.
Additionally,  in a lawsuit  brought against other PRPs that did not execute the
Consent Decree, Pneumo Abex and Whitman recovered  approximately $3.1 million in
settlements relating to response costs at the Portsmouth site.

     Management believes that potential  insurance  recoveries have defrayed and
will  continue to defray a portion of the  expenses  involved in meeting  Pneumo
Abex environmental  liabilities.  In November, 1992, Jensen-Kelly Corporation, a
Pneumo Abex  subsidiary,  Pneumo Abex and certain other of its  affiliates,  and
Whitman  and  certain  of its  affiliates,  filed  a  lawsuit  against  numerous
insurance  companies in the Superior  Court of California,  Los Angeles  County,
seeking damages and declaratory  relief for insurance coverage and defense costs
for  environmental  claims.  In 1997 and 1998,  Whitman and Pneumo Abex achieved
settlements  with  several  carriers,  and although  optimistic  it will receive
additional  recoveries,  Whitman is  otherwise  unable to predict the outcome of
this litigation.

     In the opinion of management,  the eventual  resolution of these claims and
litigation,  considering  amounts  accrued,  but excluding  potential  insurance
recoveries,  will not have a  material  adverse  effect on  Whitman's  financial
condition or its results of operations.

Item 2.  PROPERTIES.

     Pepsi General's  domestic  manufacturing  facilities  include four bottling
plants, four combination  bottling/canning plants and four canning plants with a
total manufacturing capacity of approximately 533,000 square feet. International
manufacturing facilities include two plants in Poland owned by the manufacturing
joint venture. Russia currently obtains product through a co-packing arrangement
in which it supplies the equipment  and raw  materials  necessary to produce its
finished goods.  During 1998, the Company began  construction of a manufacturing
facility located in the industrial  region of St.  Petersburg,  named Parnas, to
produce  finished  goods for Russia.  In  addition,  Pepsi  General  operates 71
distribution facilities, including 16 distribution facilities located in Eastern
Europe. Seventeen of the distribution facilities are leased and approximately 13
percent of Pepsi General's production is from its one leased domestic plant. The
Company  believes all  facilities  are  adequately  equipped and  maintained and
capacity is sufficient for its current needs. Pepsi General currently operates a
fleet of approximately 3,200 vehicles in the U.S. and approximately 600 vehicles
internationally to service its existing routes.

     In addition,  Whitman owns various  industrial,  commercial and residential
real estate properties in the United States and a leasing company,  which leases
approximately  2,000  railcars,  comprised of  locomotives,  flatcars and hopper
cars, to the Illinois Central Railroad Company.

Item 3.  LEGAL PROCEEDINGS.

     Whitman and its  subsidiaries  are  defendants in numerous  lawsuits in the
ordinary  course of business,  none of which,  in the opinion of management,  is
expected to have a material adverse effect on Whitman's results of operations or
financial condition.

      See also "Environmental Matters" in Item 1.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     None.
<PAGE>
                                     PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     The  common  stock of the  Company  is listed  and  traded on the New York,
Chicago and Pacific  stock  exchanges.  The table below sets forth the  reported
high and low sales  prices as  reported  for New York Stock  Exchange  Composite
Transactions  for Whitman  common stock and indicates the Whitman  dividends for
each quarterly period for the years 1998 and 1997.

                                                   Common Stock
                                       ------------------------------------
                                         High         Low        Dividend
                                       --------     --------     --------
1998:
-----
1st quarter                            $ 26.625     $ 15.563     $   0.05
2nd quarter                              23.750       19.000         0.05
3rd quarter                              23.375       14.875         0.05
4th quarter                              25.438       15.375         0.05

1997:
-----
1st quarter                            $ 24.625     $ 21.625     $  0.105
2nd quarter                              26.750       22.625        0.115
3rd quarter                              27.250       24.125        0.115
4th quarter                              28.125       24.250        0.115

     The table above  reflects the high and low stock prices for Whitman  common
stock prior to and  subsequent  to the  spin-offs of Hussmann  and Midas,  which
occurred on January 30, 1998.

     There were 15,775 shareholders of record at January 2, 1999.

Item 6.  SELECTED FINANCIAL DATA.

     The following table presents summary operating results and other statistics
of Whitman,  and should be read along with Management's  Discussion and Analysis
of Financial  Condition and Results of Operations,  the  Consolidated  Financial
Statements and accompanying notes included elsewhere in this Form 10-K.

     The following transactions were recorded during the periods presented:

     -   In 1998, the Company recorded an extraordinary  loss, net of income tax
         benefits of $10.4 million,  resulting from the early  extinguishment of
         debt (see Note 3, Extraordinary  Loss on Early  Extinguishment of Debt,
         to the Consolidated Financial Statements).

     -   In 1997, the Company  recorded special charges of $49.3 million related
         to the restructuring of Pepsi General's organization,  the severance of
         essentially  all of the Whitman  Corporate  management  and staff,  and
         expenses  associated with the spin-offs of Hussmann and Midas (see Note
         4, Special Charges, to the Consolidated  Financial  Statements).  These
         charges  reduced   operating  income  for  domestic  and  international
         operations  of  Pepsi  General  by  $11.1  million  and  $3.7  million,
         respectively,  and increased corporate administrative expenses by $34.5
         million.

     -   In 1997,  Hussmann and Midas,  which were  reclassified to discontinued
         operations  in  December,   1997,  recorded  special  charges  with  an
         after-tax cost of $93.4 million (see Note 2,  Discontinued  Operations,
         to the Consolidated Financial Statements).

     -   In 1996, the Company  recorded an $8.7 million charge,  principally for
         asset  write-downs  at Pepsi  General's  joint  venture in Poland.  The
         charge,  which is included in "other  expense,  net," reduced  minority
         interest by $1.7 million.

     -   In 1994, the Company  recorded a $24.2 million  unrealized  loss on the
         investment in Northfield Laboratories Inc., which is included in "other
         expense, net."
<PAGE>
Whitman Corporation
SELECTED FINANCIAL DATA
(in millions, except per share and employee data)
<TABLE>
<CAPTION>

For the fiscal years                                  1998            1997             1996            1995          1994
                                                   ----------      ----------       ----------      ----------    ----------
<S>                                                <C>             <C>              <C>             <C>           <C>

OPERATING RESULTS:
Sales:
  Domestic                                         $  1,551.5      $  1,464.0       $  1,451.1      $  1,413.9    $  1,255.4
  International                                          83.5            93.5             50.3            34.8           0.7
                                                   ----------      ----------       ----------      ----------    ----------
     Total                                         $  1,635.0      $  1,557.5       $  1,501.4      $  1,448.7    $  1,256.1
                                                   ==========      ==========       ==========      ==========    ==========
Operating income:
  Domestic                                         $    232.0      $    200.3       $    224.4      $    209.0    $    187.7
  International                                         (17.2)          (18.7)           (12.1)          (11.3)         (2.2)
                                                   ----------      ----------       ----------      ----------    ----------
     Total before corporate administrative
       expenses                                         214.8           181.6            212.3           197.7         185.5
     Corporate administrative expenses                  (11.0)          (51.4)           (17.5)          (16.6)        (16.4)
                                                   ----------      ----------       ----------      ----------    ----------
     Total operating income                             203.8           130.2            194.8           181.1         169.1
Interest expense, net                                   (36.1)          (42.3)           (41.5)          (47.6)        (45.4)
Other expense, net                                      (15.5)          (18.0)           (25.6)          (15.3)        (43.4)
                                                   ----------      ----------       ----------      ----------    ----------
     Income before income taxes                         152.2            69.9            127.7           118.2          80.3
Income taxes                                             69.7            37.9             61.1            52.8          35.6
Minority interest                                        20.0            16.2             18.8            18.6          18.2
                                                   ----------      ----------       ----------      ----------    ----------
Income from continuing operations                        62.5            15.8             47.8            46.8          26.5
Income (loss) from discontinued operations               (0.5)          (11.7)            91.6            86.7          76.7
Extraordinary loss on early extinguishment of
  debt after taxes                                      (18.3)             --               --              --            --
                                                   ----------      ----------       ----------      ----------    ----------
Net income                                         $     43.7      $      4.1       $    139.4      $    133.5    $    103.2
                                                   ==========      ==========       ==========      ==========    ==========

Cash dividends per common share                    $     0.20      $     0.45       $     0.41      $     0.37    $     0.33
                                                   ==========      ==========       ==========      ==========    ==========
Weighted average common shares:
Basic                                                   101.1           101.6            104.8           104.9         105.5
Incremental effect of stock options                       1.8             1.3              1.2             1.1           0.7
                                                   ----------      ----------       ----------      ----------    ----------
Diluted                                                 102.9           102.9            106.0           106.0         106.2
                                                   ==========      ==========       ==========      ==========    ==========
Income (loss) per share - basic:
Continuing operations                              $     0.62      $     0.16       $     0.46      $     0.44    $     0.25
Discontinued operations                                 (0.01)          (0.12)            0.87            0.83          0.73
Extraordinary loss on early debt extinguishment         (0.18)             --               --              --            --
                                                   ----------      ----------       ----------      ----------    ----------
  Net income                                       $     0.43      $     0.04       $     1.33      $     1.27    $     0.98
                                                   ==========      ==========       ==========      ==========    ==========
Income (loss) per share - diluted:
Continuing operations                              $     0.61      $     0.15       $     0.45      $     0.44    $     0.25
Discontinued operations                                 (0.01)          (0.11)            0.87            0.82          0.72
Extraordinary loss on early debt extinguishment         (0.18)             --               --              --            --
                                                   ----------      ----------       ----------      ----------    ----------
  Net income                                       $     0.42      $     0.04       $     1.32      $     1.26    $     0.97
                                                   ==========      ==========       ==========      ==========    ==========
OTHER STATISTICS:
Total assets                                       $  1,569.3      $  2,029.7       $  2,080.6      $  2,050.5    $  1,853.8
Long-term debt                                     $    603.6      $    604.7       $    821.7      $    810.3    $    704.0
Capital investments                                $    159.1      $     83.4       $     87.2      $    111.1    $     66.0
Depreciation and amortization                      $     77.7      $     73.8       $     75.2      $     70.6    $     64.3
Number of employees                                     6,526           6,381            5,863           5,739         5,044
</TABLE>
<PAGE>
Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS.

Liquidity and Capital Resources

     Net cash  provided by continuing  operations  increased by $16.9 million to
$169.8 million in 1998.  Income from continuing  operations in 1998 increased by
$46.7  million,  principally  due to the  after tax  impact  in 1997 of  special
charges of $31.6 million.  Cash outlays related to special charges totaled $24.4
million during 1998,  compared to $2.4 million in 1997. The increase in deferred
taxes  related  primarily to increased  capital  spending,  foreign  branch loss
activity,  and the tax  deductibility  of cash  outlays  related to 1997 special
charges.  Changes  in  primary  working  capital  (defined  as  receivables  and
inventories less payables)  required net additional cash of $8.6 million in 1998
compared  with $13.8  million in the prior  year.  Individually,  components  of
primary  working  capital  increased  due, in part, to increased  production and
sales  activities in late 1998 versus late 1997.  The change in other assets and
liabilities  was due, in part, to tax benefits of $10.4 million  resulting  from
the  debt  tenders  in  January,   1998  (see  Note  3,  Extraordinary  Loss  on
Early Extinguishment of Debt, to the Consolidated Financial Statements).

     Investing  activities  during  1998  included  $434.3  million  received in
January,  1998,  from  Hussmann  and Midas  prior to their  spin-offs  to settle
intercompany indebtedness and to pay special dividends. The Company made capital
investments  of  $155.4  million,  net of  proceeds  from  dispositions,  in its
operations  during 1998 compared with $81.5 million in the previous  year,  with
increased  spending  principally  attributable  to additional  vending  machines
placed in the market.  It is expected that capital  spending in 1999,  excluding
acquisitions, will be lower than 1998 levels due, in part, to a planned decrease
in international spending.  Capital spending in the international  operations in
1998 included  expenditures  for a  manufacturing  facility in Russia.  In 1997,
Pepsi General acquired the Pepsi-Cola bottler in St. Petersburg from PepsiCo for
$20.2 million. Cash received,  net of investments made, from the Company's joint
venture in Poland was $3.7 million in 1998  compared to net  investments  in the
joint venture of $2.2 million in 1997.

     Purchases  and sales of  investments  principally  relate to the  Company's
insurance  subsidiary,  which  provides  certain  levels of insurance  for Pepsi
General and the discontinued  operations of Hussmann and Midas up to the date of
the  spin-offs.  Funds provided  through  premiums are invested by the insurance
subsidiary and proceeds from the sale of  investments  are used by the insurance
subsidiary  to pay  claims and other  expenses.  A  substantial  portion of such
investments are reinvested as they mature. In December, 1998, the Company repaid
a loan, including accrued interest, from its insurance subsidiary.  These funds,
totaling $71.8 million, were invested in cash and equivalents at year end by the
Company's insurance subsidiary.

     The Company's  total debt  decreased  $283.6  million to $603.6  million at
January 2, 1999,  from $887.2 million at December 31, 1997. In the first quarter
of 1998, as discussed in Note 3, Extraordinary  Loss on Early  Extinguishment of
Debt,  to  the  Consolidated   Financial  Statements,   the  Company  made  debt
repayments,  including premiums, of $311.2 million. As part of its ongoing share
repurchase program, the Company repurchased approximately 2.0 million shares and
3.3 million  shares of its common stock for $37.7  million and $82.1  million in
1998 and 1997,  respectively.  Subsequent  to January 2, 1999,  the  Company has
repurchased  11.6 million shares for $221.4 million  through March 23, 1999. The
Company  paid  dividends  of $20.2  million  in 1998,  based on an  annual  cash
dividend  rate of $0.20 per common  share,  compared with $45.6 million in 1997,
based on an annual cash dividend rate of $0.45 per share. The issuance of common
stock,  including treasury shares, for the exercise of stock options resulted in
cash inflows of $21.4 million in 1998, compared with $11.8 million in 1997.

     The Company has $200 million  available under its commercial  paper program
and $300 million  available  under a contractual  revolving  credit facility for
necessary  borrowings or as back-up for the Company's  commercial paper program.
Neither  facility  was in use at January  2,  1999.  In  addition,  the  Company
maintains a  revolving  credit  facility  related to its  operations  in Russia,
permitting  total  borrowings  of up to  $35.0  million.  Borrowings  under  the
facility  amounted to $23.5  million as of January 2, 1999. On January 25, 1999,
the Company  announced the terms of the Agreement  with PepsiCo,  which includes
issuing 54 million  shares of common stock of New Whitman,  the entity formed to
carry out the Agreement,  and incurring debt obligations of  approximately  $300
million.  In  addition,  the Company has agreed to  repurchase  up to 16 million
shares,  or $400 million of its common stock,  whichever is less,  during the 12
month period following the close of the transaction. PepsiCo has agreed that the
shares  repurchased  subsequent  to  January  2, 1999 may be used to reduce  the
repurchase  commitment.  The Company  believes that with its existing  operating
cash flows and expected  operating  cash flows from newly  acquired  territories
from PepsiCo,  available lines of credit,  and the potential for additional debt
and equity  offerings,  New Whitman will have  sufficient  resources to fund its
future  growth and  expansion,  including  potential  domestic or  international
franchise acquisitions.

Operating Results -  1998 compared with 1997

     For a  description  of the  Company's  major  products  and  its  principal
markets,  reference is made to Part I, Item 1, Business, and to Note 16, Segment
Reporting, to the Consolidated Financial Statements.

Sales

     Sales  increased  by $77.5  million,  or 5.0  percent,  in 1998 to $1,635.0
million.

     Domestic  sales  increased by $87.5  million,  or 6.0  percent,  in 1998 to
$1,551.5  million.  This  increase  reflects  improvements  in mix,  pricing and
increased volumes.  The average domestic net selling price per raw case rose 2.5
percent  and  volume,  in raw cases,  grew 3.5  percent  over  1997.  In 8-ounce
equivalent cases, volume,  including foodservice,  increased 5.3 percent in 1998
to  444.5  million   cases.   Sales  growth  was  driven   principally   by  the
convenience/gas  station channel, the vending channel, and the fountain channel.
Volume  growth was led  primarily by improved  demand for the  Mountain  Dew, Dr
Pepper,  and Lipton Tea brands.  Also  contributing to the increased  volume was
double  digit growth in the water  brands  Aquafina  and Avalon,  and the strong
performance of Pepsi brand product sales,  which  included the  introduction  of
Pepsi One and Storm. In 1998, the Company began  reporting  volume on an 8-ounce
equivalent  basis, as well as raw cases, to better reflect the impact of package
mix shift towards the  20/24-ounce  NR packages.  The 20-ounce NR package growth
benefited from a significant increase in vending machine placements during 1998.

     International   sales   decreased  by  $10.0  million  to  $83.5   million,
principally reflecting a $12.5 million decline in contract sales and the adverse
effects of the economic crisis in Russia. Sales for Russia in the fourth quarter
of 1998,  which are reported on a two-month  lag, were $2.5 million  compared to
$8.0 million in the  comparable  period of 1997.  However,  1998 included a full
twelve months of sales for Russia  compared to ten months in the previous  year,
which  partially  offset the lower  contract  sales and  economic  downturn.  In
addition,  Poland's  sales were  adversely  impacted by unusually  cold weather,
which depressed industry sales,  partially offset by sales growth resulting from
a product mix shift to more polyethylene ("PET") packaging and favorable results
from newly introduced juice products.

Gross Profit

     The Company's  consolidated gross profit increased by $25.6 million, or 4.4
percent,  to $610.5 million.  The  consolidated  gross profit margin declined to
37.3  percent  of sales in 1998  from  37.6  percent  in  1997.  This  reduction
principally reflected higher costs for concentrate,  fructose,  and packaging in
the domestic  operations,  which reduced the domestic gross profit margin by 0.4
percentage  points to 38.3  percent.  Internationally,  the gross profit  margin
increased  by 1.3  percentage  points to 20.4  percent  from 19.1 percent in the
previous  year,  due to higher  margins in Poland  resulting  from a product mix
shift to more PET packaging.  However, partially offsetting this improvement was
the economic  downturn in Russia,  which slowed demand and lowered gross margins
as the sales volume was insufficient to absorb fixed manufacturing overhead.

Selling, General and Administrative Expenses

     Selling,  general and  administrative  ("S,G&A") expenses increased by $1.4
million, or 0.4 percent, and represented 23.9 percent of sales, compared with 25
percent in 1997.  This lower  percentage  rate  reflected,  among  other  items,
increases  in  various  forms of  support  from  PepsiCo  and the  reduction  in
corporate headquarters' management and staff. Corporate administrative expenses,
excluding special charges of $34.5 million recorded in 1997, declined from $16.9
million in 1997 to $11.0 million in 1998. Furthermore, the 1997 S,G&A included a
$2.7 million charge  recorded by Pepsi General in the second quarter of 1997 for
reductions in administrative overhead.

Operating Income

     Operating  income  increased by $73.6 million,  or 56.5 percent,  to $203.8
million.  The  increase was  primarily  the result of special  charges  incurred
during the third and fourth quarters of 1997 totaling $49.3 million (see Note 4,
Special Charges, to the Consolidated Financial Statements),  as well as improved
operating results in the domestic operations.

     Pepsi General's  domestic operating income was up $31.7 million in 1998, or
15.8  percent,  from the  previous  year to $232  million.  Included in the 1997
results  were  special  charges  of  $11.1  million,  primarily  related  to the
consolidation  of its divisions.  Excluding  special  charges  recorded in 1997,
Pepsi  General's  domestic  operating  income  increased  $20.6 million,  or 9.7
percent.  The improvement in operating income was due in part to higher volumes,
mix shift towards the higher margin  20/24-ounce  NR packages and the effects of
the $2.7 million charge  recorded in the second  quarter of 1997.  Excluding the
impact  of the  charges  in  1997,  domestic  operating  margins  increased  0.6
percentage  points from 1997 to 15.0  percent in 1998.  The  improved  operating
margins  reflected  a  favorable  shift in  product  mix to the high  margin  NR
packages and a more favorable channel mix.

     Pepsi General's  international  operating losses were $17.2 million in 1998
compared to $18.7  million a year ago,  which  included  $3.7 million of special
charges.  Excluding  these  special  charges,   international  operating  losses
increased by $2.2 million.  This increase was caused  primarily by the financial
crisis in Russia, partially offset by improved results in Poland attributable to
increased  sales of product in PET  packages and the  introduction  of new juice
products.

Interest and Other Expenses

     Net interest expense decreased $6.2 million to $36.1 million, primarily due
to  the  repayment  of  debt  using  funds  received  from  Hussmann  and  Midas
immediately  prior  to  the  spin-off  transactions.  Cash  in  excess  of  debt
repayments was invested in short-term instruments,  resulting in higher interest
income in 1998  compared  with 1997.  Decreases  in net  interest  expense  were
partially  offset by the  decrease in interest  income on loans and  advances to
Hussmann  and  Midas,  which  were  repaid  in  conjunction  with  the  spin-off
transactions.

     Other  expense,  net,  decreased $2.5 million to $15.5 million in 1998. The
improvement was due, in part, to losses from asset sales/retirements included in
1997 and the  elimination  of preferred  dividends  (see Note 13, Pepsi  General
Non-Voting Preferred Stock, to the Consolidated Financial Statements).

Environmental Liabilities

     Environmental  liabilities  are  discussed  further  in  Part  I,  Item  1,
Business,   and  Note  15,  Environmental  and  Other   Contingencies,   to  the
Consolidated Financial Statements.

Operating Results -  1997 compared with 1996

Sales

     Sales  increased  by $56.1  million,  or 3.7  percent,  in 1997 to $1,557.5
million.

     Domestic  sales  increased by $12.9  million,  or 0.9  percent,  in 1997 to
$1,464.0 million.  Unit case volume (which represented  approximately 88 percent
of total sales) in the U.S.  increased  by 4.8  percent.  The increase in volume
principally reflected growth in Mountain Dew, Dr Pepper, Mug Root Beer and Sunny
Delight, with Pepsi brand product sales volume being essentially flat with 1996.
This  increase  in volume  was  offset to a large  degree by lower  average  net
selling prices.  The average net selling price on this unit case volume fell 4.2
percent  below the prior year,  reflecting  the  extremely  competitive  pricing
environment  throughout Pepsi General's  domestic  markets,  particularly in the
supermarket channel.

     International  sales  increased  by $43.2  million  to $93.5  million.  The
increase  principally  reflected Pepsi  General's  expansion into newly acquired
territories in Russia and the Baltics.

Gross Profit

     The Company's  consolidated gross profit increased by $7.9 million,  or 1.4
percent, to $584.9 million.  The gross profit margin declined to 37.6 percent of
sales in 1997 from 38.4 percent in 1996.  This reduction  principally  reflected
the adverse  effects of the  competitive  pricing  pressures in Pepsi  General's
domestic  markets.  The domestic gross profit margin  declined by 0.4 percentage
points to 38.7 percent.  Contributing to the decline in the consolidated  margin
were lower  margin  sales in the newly  acquired  territories  in Russia and the
Baltics,  reflecting an extremely  competitive  pricing  environment and certain
inefficiencies  related to the start-up of these  operations.  Margins in Poland
improved,   reflecting  the  benefits  of  increased  volume  and  manufacturing
efficiencies.   Internationally,  the  gross  profit  margin  decreased  by  0.7
percentage points to 19.1 percent from 19.8 percent in the previous year.

Selling, General and Administrative Expenses

     S,G&A expenses  increased by $22.9 million,  or 6.2 percent,  compared with
the 3.7 percent increase in sales. As a result, S,G&A expenses increased to 25.0
percent  of sales,  compared  with 24.4  percent in 1996.  The  higher  level of
expenses reflected,  among other items, the start-up of operations in Russia and
the  Baltics,  which  accounted  for more  than  half of the  increase  in S,G&A
expenses.  The increase in S,G&A  expenses as a percent of sales also  reflected
the  competitive  pricing  environment  during  1997.  Corporate  administrative
expenses declined slightly from $17.5 million in 1996 to $16.9 million in 1997.

Special Charges

     During 1997, the Company  recorded  special charges totaling $49.3 million,
including  $14.8 million  recorded at Pepsi General to consolidate the number of
its  domestic  divisions,  including  reductions  in  staffing  levels,  and  to
write-down  certain  assets in its  domestic  and  foreign  operations.  Special
charges  of $34.5  million  were  recorded  for the  Whitman  corporate  office,
principally  relating  to the  severance  of  essentially  all  of  the  Whitman
corporate management and staff and for expenses associated with the spin-offs.

     Detailed  information with respect to the special charges recorded in 1997,
related  expenditures in 1997 and 1998, and the remaining accrued liabilities at
the  end of  fiscal  1998  is  presented  in Note  4,  Special  Charges,  to the
Consolidated   Financial  Statements.   At  the  end  of  fiscal  1998,  accrued
liabilities of $14.5 million are intended to cover deferred  severance  payments
and certain employee benefits.  The Company has classified the accruals as other
current  liabilities  because it expects that the severance and benefit payments
will be disbursed in 1999.

     At the time  the  special  charges  were  recorded  in  1997,  the  Company
anticipated  that  corporate  expenses  would be reduced by  approximately  $7.0
million on an annualized  basis,  but indicated  the estimated  cost  reductions
would not be fully  realized in the first year. In 1998, the cost reduction goal
was substantially  achieved, as corporate  administrative expenses declined from
1997 by $5.9 million.

Operating Income

     Operating  income  declined by $64.6  million,  or 33.2 percent,  to $130.2
million.  The  decrease  was  primarily  the result of special  charges of $49.3
million.

     Pepsi General's  domestic  operating income was down $24.1 million in 1997,
or 10.7  percent,  from the previous year to $200.3  million.  Included in these
results  were  special  charges  of  $11.1  million,  primarily  related  to the
consolidation of its divisions. The lower earnings also reflected the effects of
lower gross profit margins and higher  distribution  costs which were caused, in
part, by higher unit case volumes.

     Pepsi General's international operating loss increased by $6.6 million from
the previous year to $18.7 million, including special charges of $3.7 million in
1997.  The increased  operating  losses also reflected  start-up  losses of $6.9
million in Russia and the Baltics,  offset by improved results in Poland,  which
reduced its operating losses by approximately one-third.

Interest and Other Expenses

     Interest  expense,  net, did not change  significantly  on a year over year
basis.  Other  expenses,  net,  decreased by $7.6  million,  which was primarily
attributable to an $8.7 million charge recorded in 1996, principally relating to
asset write-downs at Pepsi General's joint venture in Poland.

Discontinued Operations

     The spin-offs of Hussmann and Midas occurred on January 30, 1998.  Prior to
the  spin-offs,  Hussmann  and Midas paid  Whitman a total of $434.3  million to
settle  intercompany  indebtedness  and pay special  dividends.  Whitman did not
record any gain or loss on the spin-offs.  The  distribution of the Hussmann and
Midas common stock reduced Whitman shareholders' equity by $233.3 million.

     The results of  operations  of Hussmann and Midas through the spin-off date
have been  classified as  discontinued  operations.  On a combined  basis,  they
previously  had  reported  sales and  revenues of  $1,692.6  million in 1997 and
$1,609.9   million  in  1996,  which  have  now  been  excluded  from  Whitman's
consolidated sales.

     Whitman's  consolidated  statements  of income  included  after tax  income
(loss) from discontinued operations of $(11.7) million in 1997 and $91.6 million
in 1996. Those amounts included the results of operations of Hussmann and Midas.
The 1997  after tax loss also  included  charges  of $4.2  million  relating  to
settlements with the IRS for the years 1988 through 1991, which related to other
previously discontinued operations.

     In the third and  fourth  quarters  of 1997,  Hussmann  and Midas  recorded
special  charges  of  $123.9  million,  or $93.4  million  after  tax.  Detailed
information about the charges was included in the special information  statement
that was provided to Whitman  shareholders  immediately  prior to the spin-offs.
Hussmann and Midas retained the responsibility to carry out the programs covered
by  their  special  charges,  as well as the  related  balance  sheet  accruals.
Summarized  information  about the  special  charges  and the effects of the IRS
settlements is contained in Note 2, Discontinued Operations, to the Consolidated
Financial Statements.

Year 2000 Readiness

     The Year 2000 ("Y2K") issue relates to computer applications being designed
using only two digits,  rather  than four,  to  represent  a year.  As a result,
computer applications could fail or create erroneous results by recognizing "00"
as the year 1900 rather than the year 2000. The Company  considers Y2K readiness
as the ability to manage and process date-related information without materially
abnormal or incorrect outcomes beyond January 1, 2000.

     Beginning in 1997, the Company  initiated a company-wide  effort to address
the Y2K issues that affect its operations and to minimize service interruptions.
This  effort  consists  of five  phases:  (1)  inventory,  (2)  assessment,  (3)
remediation,  (4) testing and (5) developing  contingency plans. The contingency
plans will include addressing issues associated with any non-compliant suppliers
and key customers in order to minimize the potential material adverse effects of
any Y2K problems. During 1998, the Company designated one of its senior managers
as  its  Vice  President  -  Y2K  Planning  and  Compliance.  This  position  is
responsible  for  coordinating  all  facets  of the  Company's  Y2K  initiative,
including   coordinating   efforts  and   responsibilities   between   corporate
Information Technology ("IT") and non-IT personnel and local division management
to identify,  evaluate and implement changes to centralized and  non-centralized
computer systems, applications and equipment necessary to achieve Y2K readiness.
Local management has identified and evaluated major areas of potential  business
impact,  including critical suppliers and customers, to enable proper monitoring
of Y2K conversion efforts on a centralized basis.

     In the first  quarter  of 1998,  the  Company  began  implementation  of an
integrated enterprise-wide resource planning ("ERP") system. The ERP system will
address  the  Company's  financial   applications  during  the  first  phase  of
implementation  and address  manufacturing  systems during the second phase. The
ERP project was begun with the goal of expanding  existing  system  capacity for
future growth and improving processing  efficiencies,  as well as addressing any
Y2K compliance issues associated with the Company's existing systems.  The first
phase of the ERP implementation was implemented during January, 1999, except for
the  asset  management,  accounts  receivable  and  billing  modules.  The asset
management  module will be implemented  during the first quarter of 1999,  while
the accounts receivable and billing modules will be implemented during the third
or fourth quarter of 1999. The Company is currently  assessing and preparing its
existing accounts receivable and billing systems for Y2K compliance in the event
the accounts  receivable and billing modules are not implemented  until the year
2000. The remediation and testing phases for these existing systems are targeted
for  completion  in June,  1999.  Phase two of the ERP project is expected to be
completed  during the latter  half of 1999 and first half of the Year 2000.  The
stages of the  second  phase  targeted  for  completion  in the Year 2000 do not
involve any Y2K compliance issues. In conjunction with the implementation of the
ERP  system,  certain  hardware  and  software  components  have been or will be
upgraded to expand existing capacity. Through January 2, 1999, costs incurred in
the ERP implementation totaled approximately $9.2 million.  Implementation costs
for the entire ERP  project  currently  are  expected  to be $25  million to $30
million.  These costs have been,  and will be,  funded  through  operating  cash
flows. A majority of the costs, as they relate to purchased  hardware,  software
and the implementation thereof, will be capitalized.

     The Company has  conducted an inventory of its IT systems and has corrected
substantially  all of  those  critical-path  systems  that  were  found  to have
date-related  deficiencies,  excluding the financial  systems addressed by phase
one of the ERP  implementation.  In the case of non-IT systems (i.e.,  including
embedded chip technology),  the Company conducted an inventory of its facilities
which  was  completed,  for the most  part,  by the end of 1998.  Correction  of
date-deficient  systems  and  equipment  is  occurring  simultaneously  with the
completion  and  evaluation  of this  inventory.  The Company is also  surveying
selected third parties, including its principal suppliers and customers, as well
as governmental  entities, to determine the status of their Year 2000 compliance
programs.  

     The  inventory,  assessment,  remediation  and  testing  phases  of the Y2K
project are in progress.  As part of the Company's  testing phase, it intends to
conduct  verification testing of selected  mainframe/network  component upgrades
received from suppliers. In addition, selected critical components are scheduled
to undergo  testing in a  controlled  environment  that  replicates  the current
mainframe/network  configuration  to  simulate  the turn of the century and leap
year dates.  In the event these  efforts do not  address all  potential  systems
problems,  the Company is beginning the process of developing  contingency plans
to ensure that it will be able to operate the  critical  areas of its  business.
This  process  includes  developing  alternative  plans to  engage  in  business
activities  with  customers and suppliers  should they or the Company not be Y2K
compliant,   including  resorting  to  paper  records  of  certain  transactions
presently handled  electronically.  The development of overall contingency plans
is  expected  to be  finalized  by the end of the first  quarter  of 1999,  with
refinements   occurring  as  needed   thereafter.   The  ultimate  execution  of
contingency plans, if necessary,  would be expected during the fourth quarter of
1999.

     It is expected the Company's  critical IT systems,  except as  specifically
noted  elsewhere,  will be Y2K compliant by the end of the first quarter of 1999
and the Company's  non-IT systems and equipment will be compliant by June, 1999.
Compliance  by  the  aforementioned   target  dates  is  subject  to  additional
evaluation,  remediation and testing efforts.  Incremental costs, over and above
the aforementioned  ERP system project spending,  related to the Y2K project are
being expensed as incurred and funded through operating cash flows.  Through the
end of 1998,  the  Company  had  expensed  approximately  $0.6  million  of such
incremental  costs.  Total  incremental  costs  to  ensure  Y2K  compliance  are
estimated  to be $2 million to $5 million,  with the majority of the costs being
incurred  in  1999.  This  expectation  assumes  that  the  Company  will not be
obligated to incur  significant  Y2K-related costs on behalf of its customers or
suppliers.  The projection of Y2K-related costs is based on numerous assumptions
and  estimates;  consequently,  actual  costs could be  materially  greater than
anticipated.  Plans will continue to be monitored for completion.  Incomplete or
untimely  resolution of the Y2K issue by the Company,  by  critically  important
suppliers and customers of the Company, or by governmental entities,  could have
a materially adverse impact on the Company's  business,  operations or financial
condition in the future.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.

     The  Company  is  subject to various  market  risks,  including  risks from
changes in commodity prices, interest rates and currency exchange rates.

Commodity Prices

     The risk from commodity price changes correlates to Pepsi General's ability
to recover higher product costs through price increases to customers,  which may
be limited due to the competitive  pricing  environment  that exists in the soft
drink business.  The Company has generally not used commodity  hedges to lock in
costs, but instead manages costs by entering into firm commitments for materials
used.

Interest Rates

     During 1998,  the risk from  changes in interest  rates was not material to
the Company's  operations  because a significant  portion of the Company's  debt
issues were fixed rate obligations.  Substantially all of the Company's floating
rate  exposure  related to changes in the six month LIBOR rate. If the six month
LIBOR rate had changed by 50 basis  points (0.5  percent),  the  Company's  1998
interest expense related to its floating rate obligations  would have changed by
$0.1 million.  Upon completing the transaction with PepsiCo,  it is expected the
Company may be subject to additional  floating  rate  interest  exposure and may
manage those  exposures  using  interest  rate swaps.  In 1998,  the Company had
short-term  investments  throughout a majority of the year, principally invested
in money  market  funds and  commercial  paper,  which were most closely tied to
three month  Treasury-bill  rates.  Assuming a change of 50 basis  points in the
rate of interest associated with the Company's short-term investments,  interest
income would have changed by $0.7 million.

Currency Exchange Rates

     Because the Company operates  international  franchise  territories,  it is
subject to exposure resulting from changes in currency exchange rates.  Currency
exchange rates are established  based on a variety of economic factors including
local inflation,  growth,  interest rates and governmental  actions,  as well as
other factors.  The Company  currently does not hedge the  translation  risks of
investments in its international  operations.  Any positive cash flows generated
have been reinvested in the operations,  excluding  repayments of loans from the
manufacturing joint venture in Poland.

     Non-U.S. operations do not represent a significant portion of the Company's
total  operations.  In 1998,  sales and  identifiable  assets  for the  combined
international  operations were  approximately  5% and 9%,  respectively,  of the
total  reported   amounts.   Changes  in  currency  exchange  rates  impact  the
translation  of the  results of the  international  operations  from their local
currencies into U.S.  dollars.  If the currency exchange rates had changed by 5%
in 1998,  the impact on reported  operating  income would have been less than $1
million. The economy in Russia was considered highly inflationary for accounting
purposes  with all  transactions  being  recorded  at  historical  costs in U.S.
dollars.  All gains and losses in Russia from foreign exchange  transactions are
included in the consolidated results of operations.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     See Index to Financial Information under Item 14.

Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

     None.
<PAGE>
                                    PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The names, ages and other information pertaining to the Company's directors
is set forth below:

     HERBERT M. BAUM,  President and Chief Operating Officer,  Hasbro, Inc. (toy
manufacturing and marketing). Previously Chairman and Chief Executive Officer of
Quaker State Corporation. Director of the Company since 1995. Also a director of
Dial Corporation,  Fleming Companies,  Inc., Hasbro,  Inc., Meredith Corporation
and Midas, Inc. Age 62.

     BRUCE  S.  CHELBERG,  Chairman  and  Chief  Executive  Officer  of  Whitman
Corporation.  Director  of the  Company  since  1988.  Also a director  of First
Midwest Bancorp,  Inc.,  Northfield  Laboratories Inc. and Snap-on Incorporated.
Age 64.

     RICHARD G. CLINE,  retired  Chairman and Chief  Executive  Officer of Nicor
Inc.  (natural gas distribution and containerized  liner shipping).  Director of
the Company  since  1987.  Also  Chairman of the Board and  director of Hussmann
International, Inc., a director of Kmart Corporation and Ryerson Tull, Inc., and
a trustee of Northern Institutional Funds. Age 64.

     PIERRE S. du PONT,  director in the law firm of Richards,  Layton & Finger,
P.A. Director of the Company since 1990. Also trustee of The Northwestern Mutual
Life Insurance Company. Age 64.

     ARCHIE R. DYKES,  Chairman of Capital City Holdings Inc.  (venture  capital
organization).  Director of the Company  since 1985.  Also a director of Fleming
Companies,  Inc., Hussmann  International,  Inc., Midas, Inc. and the Employment
Corporation. Age 68.

     CHARLES W. GAILLARD,  President of General  Mills,  Inc. (food marketer and
distributor).  Executive  of General  Mills since 1966.  Director of the Company
since 1997. Also a director of General Mills, Inc. Age 58.

     JAROBIN GILBERT,  JR., President and Chief Executive Officer of DBSS Group,
Inc.  (management,  planning and international trade advisory firm). Director of
the Company since 1994. Also a director of Midas,  Inc. and Venator Group,  Inc.
Age 53.

     VICTORIA  B.  JACKSON,  Former  President  and Chief  Executive  Officer of
DSS/ProDiesel,  Inc. (diesel parts  remanufacturing  and distribution  company).
Director of the Company since 1994.  Also a director of Hussmann  International,
Inc., J. H. Heafner Company and AmSouth Bancorporation. Age 44.

     CHARLES  S.  LOCKE,  retired  Chairman  of the Board  and  Chief  Executive
Officer,  Morton  International,  Inc.  (manufacturer of specialty chemicals and
salt).  Director of the Company  since 1991.  Also a director of Nicor Inc.  and
Cordant Technologies Inc. Age 70.

     The  executive  officers of Whitman and their ages as of March 1, 1999 were
as follows:

                                 Age                 Position
                                 ---                 --------
Bruce S. Chelberg                64      Chairman and Chief Executive Officer
Frank T. Westover                60      Executive Vice President
Martin M. Ellen                  45      Senior Vice President and Chief
                                          Financial Officer
Lawrence J. Pilon                50      Senior Vice President-Administration
Charles H. Connolly              64      Senior Vice President-Corporate Affairs
                                          and Investor Relations
William B. Moore                 57      Senior Vice President, Secretary and
                                          General Counsel
Larry D. Young                   44      Corporate Vice  President;  Executive
                                          Vice President and Chief Operating
                                          Officer, Pepsi-Cola General Bottlers,
                                          Inc.
<PAGE>
     Except as described  below,  all of the executive  officers of Whitman have
held  positions  which  are the  same or  which  involve  substantially  similar
functions as indicated above during the past five years.

     Mr. Ellen joined  Whitman  Corporation  as Senior Vice  President and Chief
Financial Officer in October,  1998. Prior to joining Whitman,  Mr. Ellen served
as a founding  member of Casas,  Ellen & White LLC, a venture  management  firm,
from May, 1998 through September, 1998; from October, 1996 through May, 1998 Mr.
Ellen  served as  Executive  Vice  President  and  Chief  Financial  Officer  of
PrimeCare  International Inc.; from August, 1994 through October, 1996 Mr. Ellen
served as Vice President-Finance for Caremark International, Inc.

     Prior to his  appointment  as Senior Vice President -  Administration,  Mr.
Pilon served as Senior Vice President - Human Resources of the Company.

     Mr. Young has been with the Company since 1982. He served as Vice President
and Managing  Director of the  Company's  operations in Poland in 1996 and later
that year became  President of Pepsi General's  European  Operations.  He became
Executive Vice President and Chief Operating Officer of Pepsi General in 1998.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section 16(a) of the Securities Exchange Act of 1934 requires directors and
executive officers to file reports of holdings and transactions in the Company's
Common Stock with the  Securities  and Exchange  Commission.  Based upon Company
records and other  information,  the Company  believes that all required reports
were timely  filed in 1998,  with the  exception  of one report  relating to one
transaction by an officer,  Lawrence J. Pilon, which was inadvertantly filed one
month late.

Item 11. EXECUTIVE COMPENSATION.

Compensation of Directors

     Directors who are not employees of the Company  receive an annual  retainer
of $24,000,  plus $1,000 for each meeting of the Board and each Board  Committee
meeting  attended.  The Chairman of each Board  Committee is paid an  additional
$5,000  annual  retainer.  Non-employee  directors  also receive a  supplemental
retainer  consisting  of 625  shares of the  Company's  Common  Stock,  plus the
equivalent fair market value of such shares in cash.

Summary Compensation Table

     The table below  shows  annual and long term  compensation  for each of the
Company's five most highly  compensated  executive  officers for services in all
capacities  to the Company and its  subsidiaries  during 1996,  1997,  and 1998.
Compensation,  as reflected in this table and the tables on stock  options which
follow,  is  presented  on the  basis of rules of the  Securities  and  Exchange
Commission and does not, in the case of certain  stock-based awards or accruals,
necessarily  represent  the  amount  of  compensation  realized  or which may be
realized in the future. 
<TABLE>
 <CAPTION>
                                                                                        Long Term              All Other
                                         Annual Compensation                          Compensation        Compensation ($)(a)
                          ---------------------------------------------------   ------------------------- -------------------
                                                                                         Awards
                                                                                -------------------------
                                                                                              Securities
                                                                                 Restricted   Underlying
Name and Principal                                               Other Annual       Stock       Options
     Position              Year    Salary ($)      Bonus ($)   Compensation ($) Awards ($)(b)   (#)(c)
------------------         ----    ----------      ---------   ---------------- ------------- ----------
<S>                        <C>       <C>            <C>             <C>           <C>          <C>            <C>

Bruce S. Chelberg          1998      750,000        450,000         26,155             --           --        1,348,732
 Chairman and Chief        1997      725,000        280,000         28,894        716,875      215,563          113,906
 Executive Officer         1996      679,167        417,000         23,635        881,225      235,812          119,174

Robert C. Cushing (d)      1998      366,667        225,000         13,148             --      120,000           31,990
 Corporate Vice President; 1997      270,900         80,000         11,699        242,813       73,024           26,609
 President, Pepsi-Cola
 General Bottlers, Inc.

Frank T. Westover          1998      306,000        146,000         10,063             --           --          309,779
 Executive Vice President  1997      296,667         66,000          8,609        159,563       47,832           42,857
                           1996      286,167        103,000          8,401        194,425       52,296           43,234

Larry D. Young (e)         1998      276,667        150,000          8,193             --       90,000           23,307
 Corporate Vice President;
 Executive Vice President
 and Chief Operating
 Officer, Pepsi-Cola
 General Bottlers, Inc.

Lawrence J. Pilon          1998      260,000        145,000         16,496             --      100,000          848,077
 Senior Vice President -   1997      254,167         66,000         13,066        159,563       47,832           35,506
 Administration            1996      242,500        103,000         17,220        194,425       52,296           35,663
</TABLE>

(a)  The amounts shown for All Other  Compensation  are amounts  accrued under a
     nonqualified retirement plan, together with (1) the values of premiums paid
     by the  Company  for an  executive  split  dollar  life  insurance  program
     established July 1, 1996, to replace benefits  formerly  provided under the
     Company's  group  program,  (2) cash payments in lieu of  restricted  stock
     awards and stock options under the Company's long term compensation plan as
     follows: Mr. Chelberg,  $1,249,099; Mr. Westover,  $275,618; and Mr. Pilon,
     $275,618, and (3) in the case of Mr. Chelberg, premiums paid by the Company
     for individual term insurance of $37,815 (1998), $34,135 (1997) and $30,895
     (1996).  Additionally,  Mr. Pilon  received a payment of $545,000 under the
     terms of his Change in Control  Agreement  (see  "Termination  Benefits").

(b)  The number of shares of restricted  stock and the market value thereof held
     by Messrs.  Chelberg,  Cushing,  Westover,  Young and Pilon at December 31,
     1998, was as follows: Mr. Chelberg, 32,301 shares ($819,638);  Mr. Cushing,
     9,134 shares ($231,775);  Mr. Westover, 7,167 shares ($181,863); Mr. Young,
     2,600 shares ($65,975);  and Mr. Pilon, 7,167 shares  ($181,863).  Dividend
     equivalents  were paid on restricted  stock at the time in the same amounts
     as dividends paid to all shareholders.  All shares of restricted stock were
     fully vested on January 1, 1999.

(c)  As a result of the spin-offs of Hussmann and Midas on January 30, 1998, the
     options then  outstanding  were modified to adjust the number of shares and
     relevant exercise prices pursuant to an IRS formula.

(d)  Mr. Cushing became President of Pepsi-Cola General Bottlers, Inc. in March,
     1997. He resigned in February, 1999.

(e)  Mr. Young became  Executive Vice President and Chief  Operating  Officer of
     Pepsi-Cola General Bottlers, Inc. in May, 1998.

Option/SAR Grants in 1998 Fiscal Year

     Set forth below is information on stock options  granted in the 1998 fiscal
year to the executive officers named in the Summary Compensation Table under the
Company's Revised Stock Incentive Plan. No SARs were granted.
<TABLE>
<CAPTION>
                                                                                              Potential Realizable Value At
                                  Number of    Percentage of                                  Assumed Annual Rates of Stock
                                 Securities    Total Options                                  Price Appreciation for Option
                                 Underlying     Granted to      Exercise or                             Term (b)
                                   Options     Employees in     Base Price     Expiration     -----------------------------
     Name                      Granted (#)(a)      1998           ($/Sh)          Date          5% ($)             10% ($)
     ----                      --------------  -------------    -----------    ----------     ----------         ----------
<S>                                <C>              <C>           <C>           <C>           <C>                <C>

Bruce S. Chelberg                      --             --               --            --              --                 --
Robert C. Cushing                 120,000           11.5           16.125       1/30/08       1,216,911          3,083,892
Frank T. Westover                                     --               --            --              --                 --
Larry D. Young                     90,000            8.6           16.125       1/30/08         912,683          2,312,919
Lawrence J. Pilon                 100,000            9.5          19.5313       4/30/08       1,228,313          3,112,786
</TABLE>

(a)  All options  were granted at a price equal to 100% of the fair market value
     of the  Company's  Common  Stock  at  date of each  grant.  Options  become
     exercisable as to one-third on the first  anniversary of the date of grant,
     two-thirds on the second anniversary, and in full on the third anniversary,
     except that the option  granted to Mr. Pilon is  exercisable as to one-half
     on June 30, 1999 and as to the remainder on June 30, 2000.

(b)  The dollar  amounts under these columns are the result of  calculations  at
     the 5% and 10% assumed  annual growth rates  mandated by the Securities and
     Exchange Commission and,  therefore,  are not intended to forecast possible
     future appreciation, if any, in the Company's stock price. The calculations
     were  based on the  Exercise  Price per share and the  10-year  term of the
     options.

Aggregated Option/SAR Exercises in 1998 and Year-End Option/SAR Values
<TABLE>
<CAPTION>
                                                                  Number of Securities
                                                                 Underlying Unexercised           Value of Unexercised
                                                                     Options Held At             In-the-Money Options At
                                   Shares                          January 2, 1999 (#)            January 2, 1999 ($)(a)
                                 Acquired on      Value         ---------------------------     ---------------------------
     Name                       Exercise (#)   Realized ($)     Exercisable   Unexercisable     Exercisable   Unexercisable
     ----                       ------------   ------------     -----------   -------------     -----------   -------------
<S>                               <C>            <C>               <C>            <C>            <C>             <C>

Bruce S. Chelberg                 365,436        4,809,669         443,509        222,313        5,585,458       2,314,550
Robert C. Cushing                  15,147          175,801          62,181        182,980          665,973       1,776,948
Frank T. Westover                  59,790          811,416         147,588         49,320        2,081,837         513,491
Larry D. Young                         --               --          31,675        114,607          363,692       1,091,742
Lawrence J. Pilon                  14,828          117,490          69,622        149,320          767,178       1,097,861
</TABLE>

(a)  Based on the closing  price of the  Company's  Common  Stock  ($25.375)  on
     December 31, 1998, as reported for New York Stock Exchange Composite
     Transactions.

Pension Plans

     The  Company  maintains  qualified,   defined  benefit  pension  plans  and
nonqualified  retirement  plans paying benefits in optional forms elected by the
employee  based  upon  percentage  multipliers  which  are  applied  to  Covered
Compensation and Credited  Service.  The pension plans and related  nonqualified
plans were amended effective January 1, 1992, to reinstate benefit accruals that
were frozen for most employees as of December 31, 1988, when the Company changed
its benefit  plan  structure.  The  revised  benefit  formulas  provide a normal
retirement  benefit  of 1% of  Covered  Compensation  for each year of  Credited
Service  (excluding  1989-1991),  up to a maximum of 20 years.  The changes also
include  special  minimum  benefits based on Credited  Service  accrued  through
December 31, 1988, and Covered  Compensation at retirement.  The following table
reflects future benefits, payable as life annuities upon retirement, in terms of
a range of amounts  determined  under the  revised  benefit  formulas  mentioned
above, at representative periods of Credited Service.

                            Projected Annual Pension
<TABLE>
<CAPTION>
                                                                 Years of  Credited Service (b)
                                                 --------------------------------------------------------------
     Covered Compensation (a)                        5                10               15            20 or more
     ------------------------                    ---------        ---------         ---------        ----------
     <S>                                         <C>              <C>               <C>              <C>

     $400,000                                    $  20,000        $  40,000         $  60,000        $  80,000
     $600,000                                       30,000           60,000            90,000          120,000
     $800,000                                       40,000           80,000           120,000          160,000
     $1,000,000                                     50,000          100,000           150,000          200,000
     $1,200,000                                     60,000          120,000           180,000          240,000
</TABLE>

(a)  Covered  Compensation  includes  salary and bonus,  as shown in the Summary
     Compensation Table,  averaged over the five consecutive years in which such
     compensation is the highest.

(b)  As of  January  2,  1999,  the  executive  officers  named  in the  Summary
     Compensation  Table  had the  following  years  of  Credited  Service:  Mr.
     Chelberg,  14 years, Mr. Cushing,  12 years,  Mr.  Westover,  16 years, Mr.
     Young, 14 years, and Mr. Pilon, 5 years.

Termination Benefits

     In 1995, the Company entered into amended Change in Control Agreements (the
"Agreements"),   with  Messrs.  Chelberg,  Pilon,  Westover  and  certain  other
officers.  The  Agreements,  originally  adopted in 1985 and amended and updated
from time to time  thereafter,  were a result of a determination by the Board of
Directors that it was important and in the best interests of the Company and its
shareholders to ensure that, in the event of a possible change in control of the
Company,  the stability and continuity of management would continue  unimpaired,
free of the distractions  incident to any such change in control.  Revised forms
of Change in Control Agreements were entered into with Messrs. Cushing and Young
in 1997.

     For  purposes  of the  Agreements,  a "change in  control"  includes  (i) a
consolidation  or  merger  of the  Company  in  which  the  Company  is not  the
continuing or surviving corporation or pursuant to which shares of the Company's
common stock would be converted into cash,  securities or other property,  other
than a transaction in which the  proportionate  ownership of the common stock of
the Company and the surviving corporation remains substantially unchanged,  (ii)
a  shareholder  approved  plan or proposal for the  liquidation  of the Company,
(iii)  the  acquisition  by any  person of 25% or more of the  Company's  voting
securities,  (iv) over a  two-year  period,  persons  who are  directors  of the
Company  cease to  constitute a majority of the Board,  unless the new directors
were approved by a two-thirds vote of the continuing directors,  or, for certain
officers, (v) the sale or other disposition of a majority of the stock or of all
or substantially all of the assets of a significant subsidiary of the Company in
one or more  transactions.  The  spin-offs of Hussmann  International,  Inc. and
Midas, Inc. in January,  1998 constituted a change in control of the Company for
purposes of the Agreements held by Messrs. Chelberg, Pilon and Westover, but not
for purposes of the Agreements  held by Messrs.  Cushing and Young. As reflected
in the Summary  Compensation  Table, Mr. Pilon received a partial payment of the
compensation  payable to him under the terms of his Agreement  while agreeing to
remain with the Company for a transition period following the spin-offs.

     Benefits are payable under the  Agreements  only if a change in control has
occurred  and  within  three  years  thereafter  the  officer's   employment  is
terminated involuntarily without cause or voluntarily by the officer for reasons
such as demotion,  relocation,  loss of benefits or other changes. The principal
benefits  to be provided to  officers  under the  Agreements  are (i) a lump sum
payment  equal  to  three  years'   compensation   (base  salary  and  incentive
compensation),  and  (ii)  continued  participation  in the  Company's  employee
benefit programs or equivalent  benefits for three years following  termination.
The Agreements provide that, if separation payments thereunder,  either alone or
together with payments under any other plan of the Company,  would  constitute a
"parachute  payment" as defined in the Federal Internal Revenue Code and subject
the officer to the excise tax imposed by Section  4999 of the Code,  the Company
shall pay such tax and any taxes on such payment.

     The Agreements are not employment  agreements,  and do not impair the right
of the Company to terminate the  employment of the officer with or without cause
prior to a change in  control,  or,  absent a  potential  or  pending  change in
control,  the right of the officer to voluntarily  terminate his employment.  If
and when consummated,  the proposed new business  relationship with PepsiCo will
constitute a change in control of the Company for the purposes of the definition
set forth in the Agreement held by Mr. Young.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

                             PRINCIPAL SHAREHOLDERS

     As of  March  11,  1999,  no  person  was  known by the  Company  to be the
beneficial  owner of more than 5% of the Company's  Common Stock,  except as set
forth below. The information  below relating to Ariel Capital  Management,  Inc.
and FMR Corp. is based upon statements on Schedule 13G filed with the Securities
and  Exchange  Commission,  reflecting  their  respective  shareholdings  as  of
December 31, 1998. The information  below relating to GAMCO  Investors,  Inc. et
al. is based upon a statement  on  Schedule  13D filed with the  Securities  and
Exchange Commission and dated February 27, 1998.

                                            Number of Shares
                                              and Nature of           Percent
Name and Address                          Beneficial Ownership        of Class
----------------                          --------------------        --------
Ariel Capital Management, Inc.
307 North Michigan Avenue
Chicago, Illinois 60601                         5,297,985               5.25%

FMR Corp. (a)
82 Devonshire Street
Boston, Massachusetts 02109                     7,731,820               7.66%

GAMCO Investors, Inc. (b)
Gabelli Funds, Inc.
Gemini Capital Management Ltd.
Gabelli International Limited
One Corporate Center
Rye, New York 10580                             5,536,020               5.45%

(a)  Through its  subsidiaries,  Fidelity  Management  and Research  Company and
     Fidelity  Management  Trust Company,  FMR Corp. had sole voting power as to
     173,600  shares,  no voting power as to the  remainder of such shares,  and
     sole dispositive power as to all 7,731,820 shares held by it.

(b)  Mario J. Gabelli  acts as chief  investment  officer for these  entities or
     directly or indirectly  controls them. Such entities have sole voting power
     and sole  dispositive  power with  respect to the  following  shares of the
     Company's Common Stock, respectively:  GAMCO Investors, Inc., 3,773,320 and
     3,891,020;  Gabelli Funds,  Inc.,  1,574,000 and 1,574,000;  Gemini Capital
     Management Ltd., 5,000 and 5,000; and Gabelli International Limited, 66,000
     and 66,000.

Securities Ownership of Directors and Executive Officers

     The following table sets forth the number of shares of the Company's Common
Stock  beneficially owned as of March 11, 1999, by each director of the Company,
by each  executive  officer  named below,  and by all  directors  and  executive
officers as a group.

                                            Amount and Nature
                                              of Beneficial           Percent
Name or Identity of Group                       Ownership             of Class
-------------------------                   -----------------         --------

Herbert M. Baum                                   3,375                  *
Bruce S. Chelberg                               873,286                  *
Richard G. Cline                                  6,625                  *
Pierre S. du Pont                                 4,175                  *
Archie R. Dykes                                   6,955                  *
Charles W. Gaillard                               2,875                  *
Jarobin Gilbert, Jr.                              2,175                  *
Victoria B. Jackson                               2,975                  *
Charles S. Locke                                  4,875                  *
Frank T. Westover                               254,024                  *
Larry D. Young                                   91,132                  *
Lawrence J. Pilon                               116,125                  *
All Directors and Executive
  Officers as a Group (15 persons)            1,624,233               1.78%

*    Less than 1%.

(a)  Includes shares which the named director or executive officer has the right
     to acquire within 60 days after March 11, 1999,  through  exercise of stock
     options, as follows:  Mr. Chelberg,  593,968 shares; Mr. Westover,  180,964
     shares; Mr. Young, 77,247 shares; and Mr. Pilon, 102,998 shares. The number
     of shares subject to options to purchase the Company's Common Stock held by
     all officers  and  employees of the Company  were  adjusted  following  the
     spin-offs of Hussmann  International,  Inc. and Midas,  Inc. on January 30,
     1998, in accordance with an Internal Revenue Code formula.

(b)  The number of shares of Common Stock shown as  beneficially  owned  include
     1,162,769  shares which directors and executive  officers have the right to
     acquire  within 60 days  following  March 11, 1999  through the exercise of
     stock options and 10,840 shares representing the vested beneficial interest
     of such persons under the Company's Retirement Savings Plan.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     None.
<PAGE>
                                     PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

     (a) See Index to Financial Information and Exhibit Index.

     (b) Through  January 2, 1999, no reports on Form 8-K were filed  subsequent
         to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
         September 30, 1998.
<PAGE>
                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the  undersigned,  thereunto  duly  authorized  on the 31st day of
March, 1999.

                               WHITMAN CORPORATION

                               By: /s/ MARTIN M. ELLEN
                               -----------------------
                               Martin M. Ellen
                               Senior Vice President and Chief Financial Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  in the  capacities
indicated on the 31st day of March, 1999.

     Signature                               Title

*   Bruce S. Chelberg          Chairman and Chief
    -----------------------    Executive Officer and Director
    BRUCE S. CHELBERG          (principal executive officer)

    /s/ Martin M. Ellen        Senior Vice President and Chief Financial Officer
    -----------------------    (principal financial and accounting officer)
    MARTIN M. ELLEN

*   Herbert M. Baum            Director
    -----------------------
    HERBERT M. BAUM

*   Richard G. Cline           Director       *By: /s/ MARTIN M. ELLEN
    -----------------------                        -------------------
    RICHARD G. CLINE                               Martin M. Ellen
                                                   Attorney-in-Fact
*   Pierre S. duPont           Director            March 31, 1999
    -----------------------
    PIERRE S. du PONT

*   Archie R. Dykes            Director
    -----------------------
    ARCHIE R. DYKES

*   Charles W. Gaillard        Director
    -----------------------
    CHARLES W. GAILLARD

*   Jarobin Gilbert, Jr.       Director
    -----------------------
    JAROBIN GILBERT, JR.

    -----------------------    Director
    VICTORIA B. JACKSON

*   Charles S. Locke           Director
    -----------------------
    CHARLES S. LOCKE
<PAGE>




                      WHITMAN CORPORATION AND SUBSIDIARIES



                             ----------------------

                              FINANCIAL INFORMATION


                   FOR INCLUSION IN ANNUAL REPORT ON FORM 10-K

                        FISCAL YEAR ENDED JANUARY 2, 1999



<PAGE>
                      WHITMAN CORPORATION AND SUBSIDIARIES
                         INDEX TO FINANCIAL INFORMATION




Statement of Financial Responsibility

Independent Auditors' Report

Consolidated Statements of Income for the fiscal years 1998, 1997 and 1996

Consolidated Balance Sheets as of fiscal year end 1998 and 1997

Consolidated Statements of Cash Flows for the fiscal years 1998, 1997 and 1996

Consolidated Statements of Shareholders' Equity for the fiscal years 1998, 1997
  and 1996

Notes to Consolidated Financial Statements

Pro Forma Combined Financial Information (unaudited)

Financial Statement Schedules:

     Financial  statement  schedules  have  been  omitted  because  they are not
     applicable or the required information is shown in the financial statements
     or related notes.
<PAGE>
                      STATEMENT OF FINANCIAL RESPONSIBILITY

     The   consolidated   financial   statements  of  Whitman   Corporation  and
subsidiaries  have been prepared by management,  which is responsible  for their
integrity and content.  These  statements  have been prepared in accordance with
generally  accepted  accounting  principles  and include  amounts  which reflect
certain estimates and judgments made by management.  Actual results could differ
from these estimates.

     The Board of Directors,  acting  through the Audit  Committee of the Board,
has  responsibility  for  determining  that  management  fulfills  its duties in
connection with the preparation of these consolidated financial statements.  The
Audit Committee meets  periodically and privately with the independent  auditors
and with the internal  auditors to review matters relating to the quality of the
financial reporting of the Company,  the related internal controls and the scope
and results of their audits.  The Committee  also meets with  management and the
internal auditors to review the affairs of the Company.

     To meet management's responsibility for the fair and objective reporting of
the results of operations and financial condition, the Company maintains systems
of internal  controls  and  procedures  to provide  reasonable  assurance of the
reliability of its accounting  records.  These systems include written  policies
and  procedures,  a program of  internal  audit and the  careful  selection  and
training of its financial staff.

     The  Company's  independent  auditors,  KPMG LLP,  are engaged to audit the
consolidated  financial  statements  of the Company  and to issue  their  report
thereon.  Their audit has been conducted in accordance  with generally  accepted
auditing standards. Their report appears on the following page.
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

THE BOARD OF DIRECTORS AND SHAREHOLDERS
OF WHITMAN CORPORATION:

     We have audited the  accompanying  consolidated  balance  sheets of Whitman
Corporation  and  subsidiaries  as of the end of fiscal years 1998 and 1997, and
the related  consolidated  statements of income,  shareholders'  equity and cash
flows for each of the  fiscal  years  1998,  1997 and 1996.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
consolidated  financial  statement  presentation.  We  believe  that our  audits
provide a reasonable basis for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present  fairly,  in all material  respects,  the financial  position of Whitman
Corporation  and  subsidiaries  as of the end of fiscal years 1998 and 1997, and
the  results  of their  operations  and their  cash flows for each of the fiscal
years 1998,  1997 and 1996, in conformity  with  generally  accepted  accounting
principles.

/s/ KPMG LLP


KPMG LLP
Chicago, Illinois
January 25, 1999
<PAGE>
Whitman Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except for per share data)
<TABLE>
<CAPTION>
Fiscal years                                                                              1998          1997         1996
                                                                                      -----------   -----------   -----------
<S>                                                                                   <C>           <C>           <C>
Sales                                                                                 $   1,635.0   $   1,557.5   $   1,501.4
Cost of goods sold                                                                        1,024.5         972.6         924.4
                                                                                      -----------   -----------   -----------
    Gross profit                                                                            610.5         584.9         577.0
Selling, general and administrative expenses                                                391.1         389.7         366.8
Amortization expense                                                                         15.6          15.7          15.4
Special charges (Note 4)                                                                       --          49.3            --
                                                                                      -----------   -----------   -----------
    Operating income                                                                        203.8         130.2         194.8
Interest expense, net (Note 5)                                                              (36.1)        (42.3)        (41.5)
Other expense, net                                                                          (15.5)        (18.0)        (25.6)
                                                                                      -----------   -----------   -----------
    Income before income taxes                                                              152.2          69.9         127.7
Income taxes (Note 6)                                                                        69.7          37.9          61.1
                                                                                      -----------   -----------   -----------
    Income from continuing operations before minority interest                               82.5          32.0          66.6
Minority interest                                                                            20.0          16.2          18.8
                                                                                      -----------   -----------   -----------
    Income from continuing operations                                                        62.5          15.8          47.8
    Income (loss) from discontinued operations after taxes (Note 2)                          (0.5)        (11.7)         91.6
    Extraordinary loss on early extinguishment of debt after taxes (Note 3)                 (18.3)           --            --
                                                                                      -----------   -----------   -----------
    Net income                                                                        $      43.7   $       4.1   $     139.4
                                                                                      ===========   ===========   ===========
Weighted average common shares:
Basic                                                                                       101.1         101.6         104.8
Incremental effect of stock options                                                           1.8           1.3           1.2
                                                                                      -----------   -----------   -----------
Diluted                                                                                     102.9         102.9         106.0
                                                                                      ===========   ===========   ===========
Income (loss) per share - basic:
Continuing operations                                                                 $      0.62   $      0.16   $      0.46
Discontinued operations                                                                     (0.01)        (0.12)         0.87
Extraordinary loss on early extinguishment of debt                                          (0.18)           --            --
                                                                                      -----------   -----------   -----------
Net income                                                                            $      0.43   $      0.04   $      1.33
                                                                                      ===========   ===========   ===========
Income (loss) per share- diluted:
Continuing operations                                                                 $      0.61   $      0.15   $      0.45
Discontinued operations                                                                     (0.01)        (0.11)         0.87
Extraordinary loss on early extinguishment of debt                                          (0.18)           --            --
                                                                                      -----------   -----------   -----------
Net income                                                                            $      0.42   $      0.04   $      1.32
                                                                                      ===========   ===========   ===========

Cash dividends per share                                                              $      0.20   $      0.45   $      0.41
                                                                                      ===========   ===========   ===========
</TABLE>

The following notes are an integral part of these statements.
<PAGE>
Whitman Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
As of fiscal year end                                                                               1998            1997
                                                                                               -----------     -----------
<S>                                                                                            <C>             <C>
ASSETS:
Current assets:
    Cash and equivalents                                                                       $     147.6     $      52.4
    Receivables, net of allowance of $3.2 million
      in 1998 and $3.4 million in 1997                                                               170.7           131.7
    Inventories:
      Raw materials and supplies                                                                      38.3            28.1
      Finished goods                                                                                  41.7            41.8
                                                                                               -----------     -----------
        Total inventories                                                                             80.0            69.9
Other current assets                                                                                  30.8            36.3
Net current assets of companies held for disposition                                                    --           270.5
                                                                                               -----------     -----------
      Total current assets                                                                           429.1           560.8
                                                                                               -----------     -----------
Investments                                                                                          160.0           157.0
Property (at cost):
    Land                                                                                              22.0            14.9
    Buildings and improvements                                                                       183.3           161.3
    Machinery and equipment                                                                          801.2           702.0
                                                                                               -----------     -----------
      Total property                                                                               1,006.5           878.2
    Accumulated depreciation and amortization                                                       (507.2)         (471.6)
                                                                                               -----------     -----------
      Net property                                                                                   499.3           406.6
                                                                                               -----------     -----------
Intangible assets, net of accumulated amortization of $155.5 million in 1998
    and $140.8 million in 1997                                                                       447.0           462.6
Other assets                                                                                          33.9            49.5
Net non-current assets of companies held for disposition                                                --           393.2
                                                                                               -----------     -----------
    Total assets                                                                               $   1,569.3     $   2,029.7
                                                                                               ===========     ===========
</TABLE>

The following notes are an integral part of these statements.
<PAGE>
Whitman Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
As of fiscal year end                                                                              1998            1997
                                                                                               -----------     -----------
<S>                                                                                            <C>             <C>
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
    Short-term debt, including current maturities of long-term debt                            $        --     $     282.5
    Accounts and dividends payable                                                                   138.3            97.8
    Income taxes payable                                                                               6.9             2.9
    Accrued expenses:
      Salaries and wages                                                                              22.1            16.1
      Interest                                                                                        15.1            20.7
      Other                                                                                           50.8            70.0
                                                                                               -----------     -----------
        Total current liabilities                                                                    233.2           490.0
                                                                                               -----------     -----------
Long-term debt                                                                                       603.6           604.7
Deferred income taxes                                                                                 99.1            75.4
Other liabilities                                                                                     73.3            98.4
Minority interest                                                                                    233.7           221.5
Shareholders' equity:
    Common stock (without par, 250.0 million shares authorized; 113.3 million issued
      at January 2, 1999 and 111.7 million issued at December 31, 1997)                              499.8           478.2
    Retained income                                                                                   94.3           363.4
    Accumulated other comprehensive loss:
      Cumulative translation adjustment                                                              (12.0)          (78.8)
      Unrealized investment gain                                                                       3.4             0.2
                                                                                               -----------     -----------
    Accumulated other comprehensive loss                                                              (8.6)          (78.6)
                                                                                               -----------     -----------
    Treasury stock (12.3 million shares at January 2, 1999 and 10.6 million shares at
      December 31, 1997)                                                                            (259.1)         (223.3)
                                                                                               -----------     -----------
      Total shareholders' equity                                                                     326.4           539.7
                                                                                               -----------     -----------
      Total liabilities and shareholders' equity                                               $   1,569.3     $   2,029.7
                                                                                               ===========     ===========
</TABLE>

The following notes are an integral part of these statements.
<PAGE>
Whitman Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
<TABLE>
<CAPTION>
Fiscal years                                                                              1998          1997          1996
                                                                                      -----------   -----------   -----------
<S>                                                                                   <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations                                                     $      62.5   $      15.8   $      47.8
Adjustments to reconcile to net cash provided by operating activities:
    Depreciation and amortization                                                            77.7          73.8          75.2
    Deferred income taxes                                                                    23.7           9.2           8.4
    Special charges                                                                            --          49.3            --
    Cash outlays related to 1997 special charges                                            (24.4)         (2.4)           --
    Other                                                                                    13.4          16.5          25.3
Changes in assets and liabilities, exclusive of acquisitions:
    (Increase) decrease in receivables                                                      (39.0)         (5.8)          2.4
    (Increase) decrease in inventories                                                      (10.1)         (2.4)          1.8
    Increase (decrease) in payables                                                          40.5          (5.6)          1.8
    Net change in other assets and liabilities                                               25.5           4.5         (16.8)
                                                                                      -----------   -----------   -----------
Net cash provided by continuing operations                                                  169.8         152.9         145.9
                                                                                      -----------   -----------   -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Dividends from and settlement of intercompany indebtedness with
    Hussmann and Midas prior to spin-offs                                                   434.3            --            --
Capital investments                                                                        (159.1)        (83.4)        (87.2)
Proceeds from sales of property                                                               3.7           1.9           1.6
Companies acquired, net of cash acquired                                                       --         (20.2)           --
Cash from (investments in) joint ventures                                                     3.7          (2.2)        (30.8)
Purchases of investments                                                                    (18.2)        (38.8)        (92.1)
Proceeds from sales of investments                                                           19.4          57.1         176.1
                                                                                      -----------   -----------   -----------
    Net cash provided by (used in) investing activities                                     283.8         (85.6)        (32.4)
                                                                                      -----------   -----------   -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayment of bank lines of credit and commercial paper                                   (1.5)           --         (15.0)
Proceeds from issuance of long-term debt                                                       --          75.0         124.2
Repayment of long-term debt                                                                (311.2)        (95.5)       (101.0)
Issuance of common stock                                                                     21.4          11.8          14.6
Treasury stock purchases                                                                    (37.7)        (82.1)        (93.2)
Cash dividends                                                                              (20.2)        (45.6)        (42.9)
                                                                                      -----------   -----------   -----------
    Net cash used in financing activities                                                  (349.2)       (136.4)       (113.3)
                                                                                      -----------   -----------   -----------
Net cash (used in) provided by discontinued operations                                       (8.7)        117.3          (8.7)
Effects of exchange rate changes on cash and equivalents                                     (0.5)         (0.5)         (0.3)
                                                                                      -----------   -----------   -----------
Change in cash and equivalents                                                               95.2          47.7          (8.8)
Cash and equivalents at beginning of year                                                    52.4           4.7          13.5
                                                                                      -----------   -----------   -----------
Cash and equivalents at end of year                                                   $     147.6   $      52.4   $       4.7
                                                                                      ===========   ===========   ===========
</TABLE>
The following notes are an integral part of these statements.
<PAGE>
Whitman Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(dollars in millions)
<TABLE>
<CAPTION>
                                                                            Accumulated
                                        Common Stock                           Other         Treasury Stock              Total
                                 ---------------------------    Retained   Comprehensive  ------------------------    Shareholders'
                                     Shares          Amount      Income        Loss           Shares        Amount       Equity
                                 -----------       ---------   ---------   -------------  -----------     ---------   ------------
<S>                              <C>               <C>         <C>         <C>             <C>            <C>         <C>

As of fiscal year end 1995       109,199,834       $   427.8   $   311.9   $     (45.9)    (4,000,906)    $  (66.0)   $   627.8
                                 -----------       ---------   ---------   -----------    ------------    --------    ---------
Comprehensive Income:
 Net income                                                        139.4                                                  139.4
 Other comprehensive loss:
    Translation adjustments                                                       (2.2)                                    (2.2)
    Unrealized investment loss
     (net of tax benefit of
     $4.3 million)                                                                (7.9)                                    (7.9)
                                                                                                                      ---------
 Other comprehensive loss                                                                                                 (10.1)
                                                                                                                      ---------
Comprehensive income                                                                                                      129.3
                                                                                                                      ---------
Treasury stock purchases                                                                   (3,989,894)       (93.2)       (93.2)
Stock compensation plans           1,395,959            28.5        (6.4)                     (29,188)        (1.2)        20.9
Common stock issued for
 acquisitions                                                                                  11,614          0.3          0.3
Dividends declared                                                 (42.9)                                                 (42.9)
                                 -----------       ---------   ---------   -----------    -----------     ---------   ---------
As of fiscal year end 1996       110,595,793           456.3       402.0         (56.0)    (8,008,374)      (160.1)       642.2
                                 -----------       ---------   ---------   -----------    ------------    ---------   ---------
Comprehensive loss:
 Net income                                                          4.1                                                    4.1
 Other comprehensive loss:
    Translation adjustments                                                      (21.0)                                   (21.0)
    Unrealized investment loss
     (net of tax benefit of
     $0.9 million)                                                                (1.6)                                    (1.6)
                                                                                                                      ---------
 Other comprehensive loss                                                                                                 (22.6)
                                                                                                                      ---------
Comprehensive loss                                                                                                        (18.5)
                                                                                                                      ---------
Treasury stock purchases                                                                   (3,323,200)        (82.1)      (82.1)
Stock compensation plans           1,123,903            21.9         2.9                      (63,743)         (1.5)       23.3
Common stock issued for
 outstanding Pepsi General
 non-voting preferred stock
 (Note 13)                                                                                    794,115          20.4        20.4
Dividends declared                                                 (45.6)                                                 (45.6)
                                 -----------       ---------   ---------   -----------    -----------     ---------   ---------
As of fiscal year end 1997       111,719,696           478.2       363.4         (78.6)   (10,601,202)       (223.3)      539.7
                                 -----------       ---------   ---------   -----------    -----------     ---------   ---------
Comprehensive income:
 Net income                                                         43.7                                                   43.7
 Other comprehensive income:
    Translation adjustments                                                        2.6                                      2.6
    Unrealized investment gain
     (net of tax expense of
     $1.7 million)                                                                 3.2                                      3.2
                                                                                                                      ---------
 Other comprehensive income                                                                                                 5.8
                                                                                                                      ---------
Comprehensive income                                                                                                       49.5
                                                                                                                      ---------
Treasury stock purchases                                                                   (1,969,849)        (37.7)      (37.7)
Stock compensation plans           1,555,134            23.9         2.6                      290,635           1.9        28.4
Special dividend distribution of
 Hussmann and Midas common stock                        (2.3)     (295.2)         64.2                                   (233.3)
Dividends declared                                                 (20.2)                                                 (20.2)
                                 -----------       ---------   ---------   -----------    -----------     ---------   ---------
As of fiscal year end 1998       113,274,830       $   499.8   $    94.3   $      (8.6)   (12,280,416)    $  (259.1)  $   326.4
                                 ===========       =========   =========   ===========    ===========     =========   =========
</TABLE>
The following notes are an integral part of these statements.
<PAGE>
Whitman Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION.  The consolidated  financial statements include the
accounts of Whitman  Corporation and all of its  subsidiaries  (the  "Company"),
including its principal operating company, Pepsi-Cola General Bottlers, Inc. and
its subsidiaries ("Pepsi General"). The Company's financial statements have been
restated  to  classify  the  results of  operations  and net assets of  Hussmann
International,  Inc.  ("Hussmann")  and Midas,  Inc.  ("Midas") as  discontinued
operations.  Accordingly,  all  amounts  included  in the Notes to  Consolidated
Financial  Statements  pertain to continuing  operations  except where otherwise
noted. See further discussion in Note 2 - "Discontinued Operations."

FISCAL YEAR.  Effective for 1998, the Company has changed its fiscal year from a
calendar  year to a year  consisting  of 52 or 53 weeks  ending on the  Saturday
closest to December 31. The Company's 1998 fiscal year commenced January 1, 1998
and ended January 2, 1999.  Operations outside the United States are included in
the  consolidated  financial  statements  on the  basis of fiscal  years  ending
October 31. This delay in  reporting  actual  results  allows  those  operations
adequate time to prepare financial statements necessary for both local statutory
requirements and on a basis consistent with U.S. generally  accepted  accounting
principles.

CASH AND  EQUIVALENTS.  Cash and equivalents  consist of deposits with banks and
financial institutions which are unrestricted as to withdrawal or use, and which
have original maturities of three months or less.

INVENTORIES. Inventories are valued at the lower of cost (principally determined
on the average method) or net realizable value.

INVESTMENTS.  Investments  include  real  estate held for sale,  principally  at
Illinois Center, a large single location.  This mixed use development is located
on the Chicago  lakefront.  The  investments in real estate are carried at cost,
which management  believes is lower than net realizable  value. When real estate
is sold, the net proceeds are deducted from the carrying value. Investments also
include Pepsi General's  minority  interest in a manufacturing  joint venture in
Poland. Also included are bank obligations and other miscellaneous investments.

PROPERTY. Depreciation is computed on the straight-line method. When property is
sold or retired,  the cost and accumulated  depreciation are eliminated from the
accounts and gains or losses are recorded in other  expense,  net.  Expenditures
for maintenance and repairs are expensed as incurred.  The approximate ranges of
annual  depreciation  rates are 2.5  percent to 6.7 percent  for  buildings  and
improvements and 8 percent to 20 percent for machinery and equipment.

INTANGIBLE ASSETS.  Intangible assets  principally  represent the excess of cost
over fair market values of net tangible and  identifiable  intangible  assets of
acquired businesses. Also included in intangible assets are franchise rights and
non-compete  agreements  associated  with  acquired  territories.  Such  amounts
generally are being amortized on  straight-line  bases over 40 years or over the
life  of  the  agreement.   Intangible  assets  associated  with   international
operations are not significant.

CARRYING VALUES OF LONG-LIVED  ASSETS. The Company evaluates the carrying values
of its long-lived assets, including intangible assets, by reviewing undiscounted
cash flows by operating unit. Such evaluations are performed whenever events and
circumstances  indicate  that  the  carrying  value  of  an  asset  may  not  be
recoverable.  If the sum of the  projected  undiscounted  cash  flows  over  the
estimated  remaining  lives of the related  assets does not exceed the  carrying
value, the carrying value would be adjusted for the difference  between the fair
value and the carrying value.

REVENUE  RECOGNITION.   Revenue  is  recognized  when  title  to  a  product  is
transferred to the customer.

BOTTLER  INCENTIVES.  PepsiCo and other brand owners,  at their sole discretion,
provide Pepsi General with various forms of marketing  support.  This  marketing
support is intended to cover a variety of programs  and  initiatives,  including
direct  marketplace  support,  capital  equipment  funding and shared  media and
advertising  support.  Based on the objectives of the programs and  initiatives,
marketing  support is recorded as an  adjustment  to net sales or a reduction of
selling,  general and administrative  expenses.  Direct  marketplace  support is
primarily  funding by PepsiCo  and other  brand  owners of sales  discounts  and
similar  programs  and  is  recorded  as an  adjustment  to net  sales.  Capital
equipment funding is designed to support the purchase and placement of marketing
equipment and is recorded within selling,  general and administrative  expenses.
Shared media and  advertising  support is recorded as a reduction to advertising
and marketing expense within selling, general and administrative expenses. There
are no  conditions  or other  requirements  which could result in a repayment of
marketing support received.

ADVERTISING  AND  MARKETING  COSTS.  Pepsi  General is  involved in a variety of
programs  to promote  its  products.  Advertising  and  marketing  expenses  are
expensed in the year incurred.  Certain advertising and marketing costs incurred
by the Company are reimbursed by PepsiCo in the form of marketing support.  This
form of  marketing  support  is  recorded  as a  reduction  in  advertising  and
marketing  expenses.  Advertising and marketing expenses,  net of support,  were
$24.2  million,  $23.3  million  and  $25.0  million  in 1998,  1997  and  1996,
respectively.

STOCK-BASED  COMPENSATION.  The  Company  uses the  intrinsic  value  method  of
accounting for its stock-based compensation arrangements.

INCOME  (LOSS)  PER  SHARE.   Basic  earnings  per  share  are  based  upon  the
weighted-average number of common shares outstanding. Diluted earnings per share
assume the exercise of all options which are dilutive,  whether  exercisable  or
not. The dilutive effects of stock options are measured under the treasury stock
method.

RECLASSIFICATIONS.  Certain prior year amounts have been reclassified to conform
to the current year presentation.

2.   DISCONTINUED OPERATIONS

     On  January  30,  1998,  the  Company  established  Hussmann  and  Midas as
independent  publicly-held companies through tax-free distributions  (spin-offs)
to Whitman shareholders. Prior to the spin-offs, Hussmann and Midas paid Whitman
$240.0  million  and  $194.3  million,   respectively,  to  settle  intercompany
indebtedness and to pay special dividends. The spin-offs resulted in a reduction
of shareholders' equity of $233.3 million.

     Combined financial information for discontinued  operations in 1998 through
the date of the spin-offs and for the years ended  December 31, 1997 and 1996 is
shown below (in millions):

                                                1998         1997        1996
                                              ---------   ---------   ---------
Sales and revenues of Hussmann and Midas      $   109.6   $ 1,692.6   $ 1,609.9
                                              =========   =========   =========
Income (loss) from discontinued operations:
Hussmann and Midas                            $    (0.5)  $    (7.5)  $    91.6
Previously discontinued operations                   --        (4.2)         --
                                              ---------   ---------   ---------
  Income (loss) from discontinued operations  $     0.5   $   (11.7)  $    91.6
                                              =========   =========   =========

     Included  in the  1997  income  (loss)  from  discontinued  operations  for
Hussmann  and Midas were special  charges of $123.9  million,  or $93.4  million
after tax. The special charges at Hussmann primarily related to the write-off of
goodwill in its U.K.  operations  ($26.0  million),  a restructuring of the U.K.
operations  ($23.2  million)  and  a  reorganization  of  certain  manufacturing
operations in the U.S ($7.1 million).  The special charges at Midas  principally
related to its decision to franchise or close substantially all company-operated
stores in the U.S. ($35.5  million),  to record  one-time  charges for a special
product return program and changes in the U.S.  franchisee  advertising  program
($12.2 million),  to record severance benefits ($7.4 million) and to reflect the
impairment of certain assets ($12.5 million).

     The  results  of tax  settlements  with the IRS in 1997 for the years  1988
through  1991,  which  related  to  other  previously  discontinued  operations,
amounted to net  additional  tax expense of $2.9 million,  which was recorded in
the third  quarter  of 1997.  During the fourth  quarter  of 1997,  the  Company
recorded $1.3 million of additional tax expense resulting from the refinement of
deferred tax balances related to other previously discontinued operations.

     Results from  discontinued  operations were reported net of income taxes of
$0.1  million,  $39.1  million  and  $56.1  million  in  1998,  1997  and  1996,
respectively.

3.   EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT

     In  January,  1998,  Whitman  made a  tender  offer  for any and all of its
outstanding  7.625% and 8.25% notes  maturing  June 15,  2015,  and February 15,
2007,  respectively.  In connection with the tender offer,  Whitman  repurchased
7.625%  and 8.25%  notes  with  principal  amounts  of $91.0  million  and $88.5
million,  respectively.  The Company paid total premiums in connection  with the
tender offer of $26.4 million and the remaining  unamortized  discount and issue
costs related to repurchased notes were $2.1 million.  The Company also repaid a
term loan and notes with principal  amounts of $50.0 million scheduled to mature
in 1998 and 1999, notes due in 2002 with principal  amounts of $50.0 million and
industrial  revenue bonds of $5.0 million due 2013.  Costs associated with these
repayments and the remaining  unamortized issue costs were not significant.  The
Company  recorded an  extraordinary  charge of $18.3 million,  net of income tax
benefits of $10.4  million,  in the first quarter of 1998 related to these early
extinguishments of debt.

4.   SPECIAL CHARGES

     In the third and fourth  quarters  of 1997,  the Company  recorded  special
charges totaling $49.3 million.  Pepsi General recorded special charges of $14.8
million  to  consolidate  the  number  of  its  domestic  divisions,   including
reductions in staffing levels,  and to write-down certain assets in its domestic
and foreign  operations.  Special charges of $34.5 million were recorded for the
Whitman corporate office,  principally  relating to the severance of essentially
all of the Whitman  corporate  management and staff and for expenses  associated
with the spin-offs.

     The following  table  summarizes the accrued  liabilities  associated  with
special charges recorded during 1997,  expenditures and asset writedowns through
January 2, 1999, and the remaining accrued  liabilities at December 31, 1997 and
January 2, 1999 (in millions):
<TABLE>
<CAPTION>
                                                                                         Pepsi       Whitman
Special charges:                                                                        General     Corporate      Total
----------------                                                                      -----------  -----------  -----------
<S>                                                                                   <C>          <C>          <C>

  Employee related costs                                                              $       9.1  $      27.0  $      36.1
  Asset writedowns                                                                            4.7          0.7          5.4
  Spin-off related costs and other                                                            1.0          6.8          7.8
                                                                                      -----------  -----------   ----------
  Total                                                                                      14.8         34.5         49.3
                                                                                      -----------  -----------   ----------
Expenditures and asset writedowns:
  Employee related costs                                                                     (0.9)        (2.6)        (3.5)
  Asset writedowns                                                                           (4.7)        (0.7)        (5.4)
  Spin-off related costs and other                                                            --          (1.5)        (1.5)
                                                                                      -----------  -----------   ----------
  Total                                                                                      (5.6)        (4.8)       (10.4)
                                                                                      -----------  -----------   ----------
Accrued liabilities at December 31, 1997                                                      9.2         29.7         38.9
                                                                                      -----------  -----------   ----------
Expenditures:
  Employee related costs                                                                     (6.7)       (11.4)       (18.1)
  Spin-off related costs and other                                                           (1.0)        (5.3)        (6.3)
                                                                                      -----------  -----------   ----------
  Total                                                                                      (7.7)       (16.7)       (24.4)
                                                                                      -----------  -----------   ----------
Accrued liabilities at January 2, 1999                                                $       1.5  $      13.0  $      14.5
                                                                                      ===========  ===========  ===========
</TABLE>

     Employee  related costs include  severance  payments for the management and
staff affected by the changes in the organizational  structure, as well as other
headcount  reduction  programs.  Employee  related  costs also include  non-cash
compensation related to previously granted stock awards to key management, which
have been fully vested. The total number of employees affected was approximately
125 at Pepsi  General  and  essentially  all  employees  at  Whitman  Corporate.
Approximately 150 positions have been eliminated by reason of these programs.

     The  accrued  liabilities  at January  2, 1999 are  comprised  of  deferred
severance  payments  and certain  employee  benefits.  Substantially  all of the
amounts  accrued  are  expected to be paid in 1999 and are  classified  as other
current liabilities.

5.   INTEREST EXPENSE, NET

     Interest expense, net, consisted of the following (in millions):

                                              1998         1997         1996
                                            --------     --------     --------
Interest expense                            $  (46.4)    $  (69.0)    $  (68.2)
Interest income from Hussmann and Midas          1.6         23.1         23.7
Other interest income                            8.7          3.6          3.0
                                            --------     --------     --------
Interest expense, net                       $  (36.1)    $  (42.3)    $  (41.5)
                                            ========     ========     ========

     Interest income from Hussmann and Midas related to  intercompany  loans and
advances.  The  related  interest  expense  recorded  by  Hussmann  and Midas is
included in income (loss) from discontinued operations.

     The loans and advances to Hussmann  and Midas were repaid to Whitman  prior
to the  spin-offs  of  Hussmann  and Midas on  January  30,  1998.  See Note 2 -
"Discontinued Operations."

6.   INCOME TAXES

     Income taxes consisted of the following:

(in millions)                                1998         1997         1996
                                           --------     --------     --------
Current:
  Federal                                  $   38.2     $   33.3     $   39.0
  Non-U.S.                                       --           --           --
  State and local                               7.3          7.2          8.3
                                           --------     --------     --------
     Total current                             45.5         40.5         47.3
                                           --------     --------     --------
Deferred:
  Federal                                      22.0         (3.2)        12.8
  Non-U.S.                                     (0.6)        (0.7)        (0.3)
  State and local                               2.8          1.3          1.3
                                           --------     --------     --------
     Total deferred                            24.2         (2.6)        13.8
                                           --------     --------     --------
Total income taxes                         $   69.7     $   37.9     $   61.1
                                           ========     ========     ========

     The  items  which  gave rise to  differences  between  income  taxes in the
Consolidated Statements of Income and income taxes computed at the U.S.
statutory rate are summarized below:
<TABLE>
<CAPTION>
                                                                    1998                  1997                  1996
                                                             ------------------    -----------------     -----------------
(dollars in millions)                                         Amount       %        Amount       %        Amount       %
---------------------                                        --------    -----     --------    -----     --------    -----
<S>                                                          <C>          <C>      <C>          <C>      <C>          <C>

Income taxes computed at the U.S. statutory rate             $   53.3     35.0     $   24.5     35.0     $   44.7     35.0
State income taxes, net of federal income tax benefit             6.6      4.3          5.6      8.0          6.2      4.9
Non-U.S. losses with no foreign tax benefits                      6.6      4.3          6.5      9.3          7.2      5.6
Non-deductible portion of amortization-intangible assets          4.4      2.9          4.3      6.2          4.5      3.5
Other items, net                                                 (1.2)    (0.7)        (3.0)    (4.3)        (1.5)    (1.2)
                                                             --------    -----     --------    -----     --------   ------
Income taxes                                                 $   69.7     45.8     $   37.9     54.2     $   61.1     47.8
                                                             ========    =====     ========    =====     ========   ======
</TABLE>

     In 1998 and 1997,  the Company  settled  Federal income tax audits with the
IRS for the year 1992 and the years 1988 through 1991, respectively. Accruals no
longer required were credited to income and are reflected in "other items,  net"
in the table above.

     Deferred  income taxes are  attributable to "temporary  differences"  which
exist between the financial  statement bases and tax bases of certain assets and
liabilities  and to net  operating  loss  carryforwards.  At January 2, 1999 and
December 31, 1997, deferred income taxes are attributable to:
<TABLE>
<CAPTION>
(in millions)                                                                       1998         1997
-------------                                                                     --------     --------
<S>                                                                               <C>          <C>
Deferred tax assets:
Provision for special charges and previously sold businesses                      $   13.5     $   21.5
Non-U.S. net operating loss carryforwards                                             14.7         18.8
Lease transactions                                                                    13.0         14.1
Unrealized losses on investments                                                       6.6          8.3
Pension and postretirement benefits                                                    6.2          6.2
Deferred compensation                                                                  4.8          4.5
Other                                                                                 12.7         10.9
                                                                                  --------     --------
Gross deferred tax assets                                                             71.5         84.3
Valuation allowance - Non-U.S. net operating loss carryforwards                      (13.2)       (17.8)
                                                                                  --------     --------
  Net deferred tax assets                                                         $   58.3     $   66.5
                                                                                  --------     --------
Deferred tax liabilities:
Property, plant and equipment                                                     $  (67.3)    $  (63.4)
Non-U.S. branch activity                                                             (30.4)       (20.6)
Intangible assets                                                                     (9.2)        (8.4)
Deferred state taxes                                                                  (8.4)        (6.2)
Other                                                                                (29.3)       (26.7)
                                                                                  --------     --------
  Total deferred tax liabilities                                                  $ (144.6)    $ (125.3)
                                                                                  --------     --------
     Net deferred tax liability                                                   $  (86.3)    $  (58.8)
                                                                                  ========     ========

Net deferred tax asset (liability) included in:
     Other current assets                                                         $   12.8     $   16.6
     Deferred income taxes                                                           (99.1)       (75.4)
                                                                                  --------     --------
     Net deferred tax liability                                                   $  (86.3)    $  (58.8)
                                                                                  ========     ========
</TABLE>

     There currently is no undistributed non-U.S. income because Pepsi General's
international   operations  have  generated   pretax  losses  since  they  began
operations.  Pretax losses from  international  operations  were $20.6  million,
$20.4 million and $21.3 million in 1998, 1997 and 1996, respectively. At January
2,  1999,  estimated  potential  future  non-U.S.  income  tax  benefits  of net
operating  losses were $14.7 million,  for which a valuation  allowance of $13.2
million has been provided.  This valuation allowance reflects the uncertainty of
the  Company's  ability  to fully  utilize  these  benefits  given  the  limited
carryforward periods permitted by the non-U.S. taxing jurisdictions.  The change
in the valuation allowance of $4.6 million during 1998 principally  reflects the
expiration  of certain net operating  losses and changes in non-U.S.  tax rates,
offset by allowances provided on international losses incurred during 1998.

7.   DEBT

     Debt at January 2, 1999 and December 31, 1997 consisted of the following:
<TABLE>
<CAPTION>
(in millions)                                                                                       1998         1997
                                                                                                ----------    ----------
<S>                                                                                             <C>           <C>

6.25% to 6.90% notes due 2000 and 2005                                                          $    136.5    $    136.5
7.5% notes due 2003                                                                                  125.0         125.0
7.29% and 7.44% notes due 2026 ($100 million and $25 million due 2004 and 2008,
  respectively, at option of note holder)                                                            125.0         125.0
6.5% notes due 2006                                                                                  100.0         100.0
7.625% notes due 2015                                                                                  9.0         100.0
8.25% notes due 2007                                                                                  11.5         100.0
7.5% notes due 2001                                                                                   75.0          75.0
Notes due 2002, effective interest rate 6.2%                                                            --          50.0
Term loan and note due 1998 through 1999, effective interest rates 6.5% to 6.9%                         --          50.0
Russian revolving credit borrowings, effective interest rate 6.3%                                     23.5          25.0
Various other debt                                                                                     0.1           5.1
                                                                                                ----------    ----------
  Total debt                                                                                         605.6         891.6
Less:  Amount classified as short-term debt                                                             --         282.5
       Unamortized discount                                                                            2.0           4.4
                                                                                                ----------    ----------
Total long-term debt                                                                            $    603.6    $    604.7
                                                                                                ==========    ==========
</TABLE>

     The Company maintains a $200 million  commercial paper program and also has
$300  million  available  under a  contractual  revolving  credit  facility  for
necessary  borrowings  or as backup  lines for the  Company's  commercial  paper
program. The interest rates on the revolving credit facility,  expiring in 2000,
are based primarily on the London Interbank  Offered Rate ("LIBOR").  There were
no borrowings  under the revolving  credit facility at either January 2, 1999 or
December 31, 1997. Fees payable on the unused portion of such  commitments  were
not material.

     Pepsi General, in connection with its Russian operations, has a contractual
revolving  credit  facility  which permits it to borrow up to $35 million.  Each
borrowing  under  the  facility  has an  initial  expiration  of up to 360 days.
Interest rates on the facility are floating,  based on LIBOR.  Borrowings  under
the facility  totaled $23.5  million at January 2, 1999,  and are expected to be
renewed when they expire.

     During January,  1998, the Company extinguished certain  indebtedness.  See
Note 3 - "Extraordinary Loss on Early Extinguishment of Debt."

     The amounts of long-term debt are scheduled to mature as follows:

                                            Amount
                     Year               (in millions)
                     ----               -------------

                     2000                $    75.5
                     2001                $    75.0
                     2002                       --
                     2003                $   125.0

     The  Company  has  pledged  certain  buildings  as  collateral  for various
long-term loan agreements. The net book value of such assets was not material at
January  2, 1999.  Certain of the  Company's  financing  arrangements  contain a
restriction  requiring the maintenance of a specific  financial ratio related to
interest coverage. The Company is in compliance with this debt covenant.

8.   FINANCIAL INSTRUMENTS

     The  Company  has used  derivative  financial  instruments  to  manage  its
interest  rate risk.  Interest  rate swap  transactions  generally  involve  the
exchange of fixed and floating rate interest payment obligations with commercial
and investment banks without the exchange of the underlying notional amounts.

     The  notional   amounts  related  to  the  Company's   interest  rate  swap
transactions were $40 million as of December 31, 1996. The contracts  underlying
these  transactions  expired during 1997. No such transactions were entered into
during 1998.

     At January 2, 1999,  the  Company had $23.5  million in floating  rate debt
exposure.  Substantially  all of the  floating  rate  exposure is related to six
month LIBOR rates. If the six month LIBOR rates changed by 50 basis points (0.50
percent),  the Company's 1998 interest expense related to the floating rate debt
outstanding during 1998 would have changed by $0.1 million.

     As of the end of each of the last two years,  the  Company  had no deferred
gains or losses related to terminated interest rate swap agreements.

     The fair market value of the Company's  floating rate debt as of January 2,
1999  approximated  its  carrying  value.  The  Company's  fixed rate debt had a
carrying  value of $580.0  million and an estimated  fair market value of $603.6
million at January 2,  1999.  The fair  market  value of the fixed rate debt was
based on  quotes  from  financial  institutions  for  instruments  with  similar
characteristics or upon discounting future cash flows.

9.   PENSION AND OTHER POSTRETIREMENT PLANS

Company-sponsored  defined  benefit  pension  plans.  Substantially  all  of the
Company's U.S. employees are covered under various defined benefit pension plans
sponsored and funded by the Company.  Plans covering salaried  employees provide
pension  benefits  based on years of  service  and  generally  are  limited to a
maximum of 20 percent of the employees' average annual  compensation  during the
five years  preceding  retirement.  Plans covering  hourly  employees  generally
provide  benefits of stated  amounts  for each year of service.  Plan assets are
invested primarily in common stocks, corporate bonds and government securities.

     Net periodic  pension cost for 1998,  1997 and 1996  included the following
components:

(in millions)                                 1998         1997         1996
                                            -------      -------      -------

Service cost                                $   3.5      $   3.4      $   3.3
Interest Cost                                   6.6          6.5          6.1
Expected return on plan assets                 (8.0)        (7.2)        (6.6)
Amortization of actuarial loss                 (0.3)         0.1          0.1
Amortization of transition asset               (0.2)        (0.2)        (0.2)
Amortization of prior service cost              0.9          0.8          0.8
                                            -------      -------      -------
Net periodic pension cost                   $   2.5      $   3.4      $   3.5
                                            =======      =======      =======

     The following  tables outline the changes in benefit  obligations  and fair
values of plan assets for the Company's pension plans and reconciles the pension
plans' funded status to the amounts  recognized in the Company's  balance sheets
as of January 2, 1999 and December 31, 1997:

(in millions)                                              1998         1997
                                                         --------     --------

Benefit obligation at beginning of year                  $   98.5     $   86.4
Service cost                                                  3.5          3.4
Interest cost                                                 6.6          6.5
Amendments                                                    0.1          0.1
Actuarial loss                                                3.7          5.7
Plan merger                                                    --          1.2
Benefits paid                                                (6.1)        (4.8)
                                                         --------     --------
Benefit obligation at end of year                        $  106.3     $   98.5
                                                         ========     ========

Fair value of plan assets at beginning of year           $  103.0     $   83.7
Actual return on plan assets                                  3.3         21.8
Plan merger                                                    --          1.0
Employer contributions                                        1.7          1.3
Benefits paid                                                (6.1)        (4.8)
                                                         --------     --------
Fair value of plan assets at end of year                 $  101.9     $  103.0
                                                         ========     ========

Funded status                                            $   (4.4)    $    4.5
Unrecognized net actuarial loss                              (0.4)        (9.1)
Unrecognized prior service cost                               4.2          4.9
Unrecognized transition asset                                (0.6)        (0.8)
                                                         --------     --------
Net amount recognized                                    $   (1.2)    $   (0.5)
                                                         ========     ========

     Net amounts recognized in the balance sheets consist of:

(in millions)                                              1998         1997
                                                         --------     --------
Prepaid pension cost                                     $    2.4     $    2.7
Accrued pension liability                                    (6.1)        (3.7)
Intangible asset                                              2.5          0.5
                                                         --------     --------
Net amount recognized                                    $   (1.2)    $   (0.5)
                                                         ========     ========

     The Company uses September 30 as the  measurement  date for plan assets and
obligations.  Pension  costs are funded in amounts not less than minimum  levels
required  by  regulation.   The  principal  economic  assumptions  used  in  the
determination  of net  periodic  pension  cost and benefit  obligations  were as
follows:

Net periodic pension cost:                           1998       1997       1996
                                                     ----       ----       ----

Discount rates                                       7.0%       7.5%       7.5%
Expected long-term rates of return on assets         9.5%       9.5%       9.5%
Rates of increase in future compensation levels      4.5%       5.0%       5.0%

Benefit obligation:                                  1998       1997
                                                     ----       ----

Discount rates                                       6.5%       7.0%
Rates of increase in future compensation levels      4.0%       4.5%


     The projected benefit  obligation,  accumulated benefit obligation and fair
value of plan assets for the pension plans with accumulated  benefit obligations
in excess of plan assets were $29.4 million,  $27.5 million and $22.2 million as
of January 2, 1999 and $5.2  million,  $3.5  million and zero as of December 31,
1997.

Company-sponsored  defined  contribution plans.  Substantially all U.S. salaried
employees  and  certain  U.S.   hourly   employees   participate  in  voluntary,
contributory  defined  contribution  plans to which the  Company  makes  partial
matching  contributions.  Company  contributions to these plans amounted to $5.1
million, $5.6 million and $5.5 million in 1998, 1997 and 1996, respectively.

Multi-employer pension plans. The Company's subsidiaries participate in a number
of  multi-employer  pension  plans,  which  provide  benefits  to certain  union
employee  groups of the Company.  Amounts  contributed to the plans totaled $3.1
million, $2.8 million and $2.5 million in 1998, 1997 and 1996, respectively.

Post-retirement benefits other than pensions. The Company provides substantially
all former U.S. salaried employees who retired prior to July 1, 1989 and certain
other  employees in the U.S.  with certain life and health care  benefits.  U.S.
salaried employees retiring after July 1, 1989 generally are required to pay the
full cost of these  benefits.  Eligibility  for these  benefits  varies with the
employee's  classification  prior to retirement.  Benefits are provided  through
insurance  contracts or welfare  trust funds.  The insured  plans  generally are
financed  by monthly  insurance  premiums  and are based  upon the prior  year's
experience.  Benefits  paid from the  welfare  trust  are  financed  by  monthly
deposits  which  approximate  the amount of current  claims  and  expenses.  The
Company has the right to modify or terminate these benefits.

     Net periodic cost of post-retirement benefits other than pensions for 1998,
1997  and  1996  amounted  to $0.1  million,  $0.2  million  and  $0.4  million,
respectively.  The Company's  post-retirement  life and health  benefits are not
funded. The unfunded accrued post-retirement  benefits amounted to $15.3 million
at January 2, 1999, and $15.7 million at December 31, 1997.

Multi-employer   post-retirement  medical  and  life  insurance.  The  Company's
subsidiaries  participate  in a number of  multi-employer  plans  which  provide
health care and survivor  benefits to union employees during their working lives
and after  retirement.  Portions of the benefit  contributions,  which cannot be
disaggregated,  related to post-retirement benefits for plan participants. Total
amounts charged against income and contributed to the plans  (including  benefit
coverage during their working lives) amounted to $5.1 million,  $4.0 million and
$3.7 million in 1998, 1997 and 1996, respectively.

10.  LEASES

     At January 2, 1999, annual minimum rental payments required under operating
leases that have  initial  noncancelable  terms in excess of one year were $10.4
million, $9.0 million, $6.3 million, $2.6 million, $1.4 million and $0.7 million
in 1999, 2000, 2001, 2002, 2003 and thereafter, respectively.

     Total  rent  expense  applicable  to  operating  leases  amounted  to $15.3
million, $14.7 million and $14.1 million in 1998, 1997 and 1996, respectively. A
majority  of  the  Company's   leases  provide  that  the  Company  pays  taxes,
maintenance, insurance and certain other operating expenses.

11.  STOCK OPTIONS AND SHARES RESERVED

     The Company's  Stock  Incentive Plan (the "Plan"),  originally  approved by
shareholders in 1982 and  subsequently  amended from time to time,  provides for
granting  incentive  stock options,  nonqualified  stock options,  related stock
appreciation  rights (SARs),  restricted stock awards, and performance awards or
any  combination of the foregoing.  Generally,  outstanding  nonqualified  stock
options are exercisable  during a ten-year  period  beginning one to three years
after the date of grant.  All options  were  granted at fair market value at the
date of grant. There are currently no outstanding stock appreciation rights.

     In January,  1998, the Company issued 92,400 options to certain Whitman and
Pepsi General  employees to purchase  Whitman  common stock at a price of $25.03
per share. The Black Scholes valuation for these options was $5.64. In addition,
the Company  issued  319,700  options to employees  of Hussmann and Midas.  As a
result of the  spin-offs,  options  to  purchase  Whitman  common  stock held by
Hussmann and Midas  employees were forfeited and new options to purchase  shares
of the separate  companies were issued to employees of each respective  company.
The total number of options  forfeited,  including  options  granted in January,
1998, were 3,041,268,  of which 889,793 were  exercisable.  The remaining option
agreements  were  modified to adjust the number of shares and relevant  exercise
prices pursuant to an IRS formula.

     No cash or other  consideration  was issued to employees  and the aggregate
intrinsic value of each option  immediately  after the spin-offs was not greater
than  the  aggregate  intrinsic  value of each  option  immediately  before  the
spin-offs.  Further,  the ratio of the  exercise  price  for each  option to the
market value per share was not reduced,  and the vesting  provisions  and option
period of each original grant remained the same. Accordingly, no new measurement
date was established relative to the forfeited options.

     Changes in options outstanding are summarized as follows:
<TABLE>
<CAPTION>
                                                                            Options Outstanding
                                                   ---------------------------------------------------------------------
                                                                                 Range of               Weighted-Average
                                                       Options                Exercise Prices            Exercise Price
                                                   ---------------            ---------------           ----------------
<S>                                                   <C>                     <C>                            <C>

Balance, January 1, 1996                               5,601,765              $10.29 - $19.44                $14.10
                                                      ----------
Granted                                                2,408,600               22.66 -  25.31                 25.27
Exercised or surrendered for SARs                     (1,174,244)              10.29 -  18.25                 13.36
Recaptured or terminated                                 (29,034)              15.69 -  25.31                 22.07
                                                      ----------
Balance, December 31, 1996                             6,807,087               11.23 -  25.31                 18.15
                                                      ----------
Granted                                                2,244,300               23.06 -  27.81                 23.13
Exercised or surrendered for SARs                       (912,426)              11.23 -  25.31                 10.80
Recaptured or terminated                                (123,734)              18.25 -  25.31                 12.43
                                                      ----------
Balance, December 31, 1997                             8,015,227               11.23 -  27.81                 19.81
                                                      ----------
Activity prior to the spin-offs:
  Granted                                                412,100               25.03 -  25.99                 25.40
  Exercised or surrendered for SARs                     (590,471)              11.23 -  25.31                 13.66
  Recaptured or terminated                            (3,041,268)              11.23 -  26.22                 22.36
Adjustment due to the spin-offs                        2,850,486
Balance, upon the spin-offs                            7,646,074                7.04 -  17.44                 11.89
Activity subsequent to the spin-offs:
  Granted                                                957,600               15.84 -  22.66                 17.30
  Exercised or surrendered for SARs                   (1,487,026)               7.04 -  15.88                 10.31
  Recaptured or terminated                              (234,727)              11.45 -  19.53                 15.11
                                                      ----------
Balance, January 2, 1999                               6,881,921                7.04 -  22.66                 13.21
                                                      ==========
</TABLE>

     The number of options exercisable at January 2, 1999 was 4,768,922,  with a
weighted-average  exercise price of $11.97, compared with options exercisable of
4,442,759  at  December  31,  1997 and  3,577,553  at  December  31,  1996  with
weighted-average exercise prices of $16.76 and $13.52, respectively.  At January
2, 1999,  there were 4,747,733  shares  available for future  grants,  primarily
provided for by the adoption of the Revised  Stock  Incentive  Plan in November,
1997.  The  following  table  summarizes  information  regarding  stock  options
outstanding and exercisable at the end of 1998:
<TABLE>
<CAPTION>
                                           Options Outstanding                                 Options Exercisable
                           ----------------------------------------------------      -------------------------------------
                                           Weighted-Average
   Range of                  Options        Remaining Life     Weighted-Average        Options            Weighted-Average
Exercise Prices            Outstanding        (in years)        Exercise Price       Exercisable           Exercise Price
---------------            -----------     ----------------    ----------------      -----------          ----------------
<S>                          <C>                  <C>              <C>                <C>                     <C>

$ 7.04 - $12.19              2,624,949            4.3              $   9.23           2,624,949               $   9.23
$14.21 - $17.44              3,965,972            8.1                 15.35           2,143,973                  15.33
$19.53 - $22.66                291,000            9.4                 20.03                  --                     --
                             ---------                                                ---------
Total Options                6,881,921            6.7                 13.21           4,768,922                  11.97
                             =========                                                =========
</TABLE>

     Statement  of  Financial  Accounting  Standards  No. 123,  "Accounting  for
Stock-Based  Compensation" requires,  among other items, the Company to disclose
either  in  the  Consolidated  Statements  of  Income  or in  the  Notes  to the
Consolidated  Financial  Statements  an  estimate  of the cost of stock  options
granted to  employees.  The Company has elected to continue to account for stock
options granted to employees in accordance with the intrinsic value method under
Accounting  Principles  Board Opinion No. 25. However,  using the  Black-Scholes
model and the following  assumptions,  the estimated fair values at the dates of
grant of options in 1998 (prior to the  spin-offs of Hussmann  and Midas),  1997
and 1996  were  $5.64,  $5.62  and  $5.72,  respectively.  The  weighted-average
estimated fair values of options granted in 1998 subsequent to the spin-offs was
$5.01. 
<TABLE> 
<CAPTION>
                                                    Options
                                                    Granted
                                                     After
                                                   Spin-Offs                    Options Granted Before Spin-Offs
                                                   ---------           -----------------------------------------------
                                                     1998                1998               1997                1996
                                                   ---------           ---------         ---------           ---------
<S>                                                  <C>                 <C>                <C>                 <C>

Risk-free interest rate                               4.7%                5.3%               6.2%                6.5%
Expected dividend yield                               1.0%                1.9%               1.7%                1.9%
Expected volatility                                  27.2%               19.8%              16.0%               16.7%
Estimated lives of options (in years)                 5.0                 5.0                5.0                 5.0
</TABLE>

     Based upon the above assumptions, the Company's pro forma net income (loss)
and income (loss) per share would have been:
<TABLE>
<CAPTION>
                                                                         1998                1997               1996
                                                                       --------            --------           --------
<S>                                                                    <C>                 <C>                <C>

Pro forma net income (loss) (in millions):
     Income from continuing operations                                 $   59.8            $   13.5           $   46.5
     Income (loss) from discontinued operations                             2.4               (14.5)              90.1
     Extraordinary loss on early extinguishment of debt                   (18.3)                 --                 --
                                                                       --------            --------           --------
     Net income (loss)                                                 $   43.9            $   (1.0)          $  136.6
                                                                       ========            ========           ========
Pro forma income (loss) per share - basic:
     Continuing operations                                             $   0.59            $   0.13           $   0.44
     Discontinued operations                                               0.02               (0.14)              0.86
     Extraordinary loss on early extinguishment of debt                   (0.18)                 --                 --
                                                                       --------            --------           --------
     Net income (loss)                                                 $   0.43            $  (0.01)          $   1.30
                                                                       ========            ========           ========
Pro forma income (loss) per share - diluted:
     Continuing operations                                             $   0.58            $   0.13           $   0.44
     Discontinued operations                                               0.02               (0.14)              0.85
     Extraordinary loss on early extinguishment of debt                   (0.18)                 --                 --
                                                                       --------            --------           --------
     Net income (loss)                                                 $   0.42            $  (0.01)          $   1.29
                                                                       ========            ========           ========
</TABLE>

     Options  granted in 1998, 1997 and 1996 vest equally each year over a three
year period.  As a result,  the estimated  costs  indicated above reflect only a
partial  vesting of such  options  and do not  consider  the pro forma costs for
options  granted  before 1995. If full vesting were  assumed,  the estimated pro
forma  compensation  costs for each year would have been higher  than  indicated
above.

     The Company  granted  233,600 and 271,700  restricted  shares of stock at a
weighted-average fair value (at the dates of grant) of $23.06 and $25.25 in 1997
and 1996, respectively,  to key members of management. No restricted shares were
granted in 1998.  Holders of restricted  shares of Whitman common stock received
shares of Hussmann and Midas in the spin-offs, free of restrictions.  A total of
132,707  Whitman   restricted  shares  were  forfeited  by  Hussmann  and  Midas
executives,  which were subsequently replaced by restricted shares of equivalent
value in each respective company.

     The Company recognized  compensation expense in S,G&A of $0.7 million, $2.8
million and $1.7 million in 1998, 1997 and 1996,  which included $0.3 million in
1998  associated  with the dividend of Hussmann and Midas  shares.  Compensation
expense  recorded in  discontinued  operations  related to these grants was $0.7
million,  $2.7  million and $1.2 million in 1998,  1997 and 1996,  respectively,
which  included  $1.3  million in 1998  related to the  dividend of Hussmann and
Midas shares,  offset by the recapture of  previously  recorded  expense of $0.6
million  related to forfeited  Whitman  shares.  On January 1, 1999,  holders of
82,871  restricted  shares of Whitman common stock received their shares free of
restrictions, which resulted in a charge of $0.3 million in 1998.

12.  SHAREHOLDER RIGHTS PLAN

     In 1989,  the Company  adopted a  Shareholder  Rights  Plan and  declared a
dividend of one preferred share purchase right (a "Right") for each  outstanding
share of common stock,  without par value, of the Company. The Rights expired on
January 30, 1999.

13.  PEPSI GENERAL NON-VOTING PREFERRED STOCK

     In December, 1997, Whitman issued 794,115 shares of its common stock valued
at $20.4 million to an affiliate of PepsiCo,  Inc.  ("PepsiCo")  in exchange for
2,025 shares of non-voting  preferred stock of Pepsi General  (including accrued
dividends).  The non-voting  preferred stock held by PepsiCo had been classified
as a component of minority interest. The accounting treatment was for Whitman to
record the 2,025 shares of  non-voting  preferred  stock as an investment in its
subsidiary,  Pepsi General,  which is eliminated in consolidation.  There was no
gain or loss on this transaction.

14.  SUPPLEMENTAL CASH FLOW INFORMATION

     Net cash provided by continuing  operations reflects cash payments and cash
receipts as follows:

(in millions)                               1998         1997         1996
                                          --------     --------     --------

Interest paid                             $   51.4     $   68.8     $   67.0
Interest received                              8.3          3.3          2.8
Income taxes paid                             23.3         53.8         68.9
Income tax refunds                             1.3         11.2          5.7

     The Company also received interest from Hussmann and Midas related to their
intercompany account balances. Net interest received from Hussmann and Midas was
$1.6  million,  $23.1  million  and  $23.7  million  in  1998,  1997  and  1996,
respectively.

     On December  31, 1996,  the Company  acquired  the St.  Petersburg,  Russia
franchise from PepsiCo.  Due to the two month time lag in financial reporting by
the Company's  international  operations,  this  acquisition was reported in the
first  quarter of 1997.  The total cost of this  acquisition  was $20.2  million
(fair value of assets  acquired of $23.5  million,  net of assumed  liabilities,
excluding  long-term  debt, of $3.3 million),  which was net of acquired cash of
$2.3  million  and  included  $15.7  million  of  long-term  debt  assumed.  The
acquisition was accounted for as a purchase,  and the operating  results include
the  acquisition  from the date of  purchase.  There  were no other  significant
acquisitions in 1998, 1997 or 1996.

     Common stock issuances for other  acquisitions in 1996 in the  Consolidated
Statements of Shareholders' Equity were related to discontinued operations.

15.  ENVIRONMENTAL AND OTHER CONTINGENCIES

     The  Company  is  subject  to  certain  indemnification  obligations  under
agreements  with  previously  sold  subsidiaries  for  potential   environmental
liabilities.  There is significant  uncertainty in assessing the Company's share
of the potential liability for such claims. The assessment and determination for
cleanup at the various sites involved is inherently speculative during the early
stages,  and the Company's share of related costs is subject to various factors,
including possible insurance  recoveries and the allocation of liabilities among
many other potentially responsible and financially viable parties.

     The Company's largest  environmental  exposure has been and continues to be
the remedial action required at a facility in Portsmouth, Virginia for which the
Company has an  indemnity  obligation.  This is a superfund  site which the U.S.
Environmental  Protection  Agency required be remediated at an estimated cost of
$31 million. Through 1998, the Company had spent an estimated $16.3 million (net
of $3.1 million of recoveries from other responsible parties) for remediation of
the Portsmouth site  (consisting  principally of soil treatment and removal) and
expects to incur an estimated $9 million to complete  the  remediation  over the
next one to two years.  The  reduction  in the total cost for this site from the
preliminary  estimate  is  attributable  primarily  to improved  technology  and
remediation techniques.

     Although  the Company has  indemnification  obligations  for  environmental
liabilities at a number of other sites, including several superfund sites, it is
not  anticipated  that the expense  involved at any  specific  site would have a
material effect on the Company.  In the case of the other superfund  sites,  the
volumetric  contribution  for  which  the  Company  has an  obligation  has been
estimated and other large, financially viable parties are responsible for all or
most of the remainder.

     At  January  2,  1999,  the  Company  had $24.3  million  accrued  to cover
potential   environmental   liabilities,   which  excludes  possible   insurance
recoveries and is determined on an  undiscounted  cash flow basis.  Based on the
latest  evaluations from outside advisors and consultants,  the Company believes
the upper end of the range for its potential future environmental liabilities is
approximately $15 million higher than the current accrued balance.  During 1998,
the Company  recorded  recoveries of $11.3 million from insurance  companies and
other responsible parties related to these environmental  liabilities, a portion
of which will be received in future  periods.  Receivables  from such recoveries
were included as assets on the Company's balance sheets.

     These  estimated  liabilities  include  expenses  for  the  remediation  of
identified  sites,  payments to third parties for claims and  expenses,  and the
expenses of on-going  evaluations and  litigation.  The estimates are based upon
the judgments of outside  consultants  and experts and their  evaluations of the
characteristics  and  parameters  of the  sites,  including  results  from field
inspections,  test borings and water flows.  Their  estimates are based upon the
use of  current  technology  and  remediation  techniques,  and do not take into
consideration any inflationary trends upon such claims or expenses,  nor do they
reflect the possible benefits of continuing improvements in remediation methods.
The accruals also do not provide for any claims for environmental liabilities or
other potential issues which may be filed against the Company in the future.

     The Company also has other  contingent  liabilities  from  various  pending
claims and litigation on a number of matters,  including  indemnification claims
under agreements with previously sold  subsidiaries  for products  liability and
toxic  torts.  The  ultimate  liability  for  these  claims,  if any,  cannot be
determined.  In the opinion of management,  and based upon information currently
available,  the ultimate  resolution of these claims and  litigation,  including
potential environmental exposures, and considering amounts already accrued, will
not have a material effect on the Company's  financial  condition or the results
of  operations.  While  additional  claims and  liabilities  may develop and may
result  in  additional  charges  to  income,  principally  through  discontinued
operations, the Company does not believe that such charges, if any, would have a
material  effect  upon the  Company's  financial  condition  or the  results  of
operations.

     Existing environmental liabilities associated with the Company's continuing
operations are not material.

16.  SEGMENT REPORTING

     Selected financial  information  related to the Company's business segments
is shown below:
<TABLE>
<CAPTION>
                                                                        Sales                            Operating Income
                                                             ------------------------------      -------------------------------
(in millions)                                                  1998       1997       1996          1998        1997       1996
                                                             --------   --------   --------      --------    --------   --------
<S>                                                          <C>        <C>        <C>           <C>         <C>        <C>

Domestic                                                     $1,551.5   $1,464.0   $1,451.1      $  232.0    $  200.3   $  224.4
International                                                    83.5       93.5       50.3         (17.2)      (18.7)     (12.1)
                                                             --------   --------   --------      --------    --------   --------
   Total before corporate administrative expenses            $1,635.0   $1,557.5   $1,501.4         214.8       181.6      212.3
                                                             ========   ========   ========      
Corporate administrative expenses                                                                   (11.0)      (51.4)     (17.5)
                                                                                                 --------    --------   --------
   Total operating income                                                                           203.8       130.2      194.8
Interest expense, net                                                                               (36.1)      (42.3)     (41.5)
Other expense, net                                                                   `              (15.5)      (18.0)     (25.6)
                                                                                                 --------    --------   --------
   Pretax income                                                                                 $  152.2    $   69.9   $  127.7
                                                                                                 ========    ========   ========
</TABLE>
<TABLE>
<CAPTION>
                                                                        Depreciation and
                                      Identifiable Assets                 Amortization                  Capital Investments
                                ------------------------------   ------------------------------   ------------------------------
(in millions)                     1998       1997       1996       1998       1997       1996       1998       1997       1996
                                --------   --------   --------   --------   --------   --------   --------   --------   --------
<S>                             <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>

Domestic                        $1,167.2   $1,005.0   $  979.7   $   68.1   $   64.5   $   62.5   $  132.6   $   71.5   $   77.1
International                      142.3      127.1       97.7        7.0        5.9        4.0       26.3       11.8        9.8
                                --------   --------   --------   --------   --------   --------   --------   --------   --------
   Total Pepsi General           1,309.5    1,132.1    1,077.4       75.1       70.4       66.5      158.9       83.3       86.9
Corporate and other
   assets                          259.8      233.9      227.8        2.6        3.4        8.7        0.2        0.1        0.3
                                                                 --------   --------   --------   --------   --------   --------
Net assets of companies
    held for disposition              --      663.7      775.4
                                --------   --------   --------
   Total assets                 $1,569.3   $2,029.7   $2,080.6   $   77.7   $   73.8   $   75.2   $  159.1   $   83.4   $   87.2
                                ========   ========   ========   ========   ========   ========   ========   ========   ========
</TABLE>


     Operating income is exclusive of net interest expense,  other miscellaneous
income and expense items, and income taxes. During the third and fourth quarters
of 1997,  the Company  recorded  special  charges of $49.3  million  (see Note 4
"Special Charges").  These charges reduced the reported operating income for the
domestic and international operations of Pepsi General by $11.1 million and $3.7
million,  respectively,  in 1997. In addition, corporate administrative expenses
in 1997 included special charges of $34.5 million.  Other expense,  net, in 1996
included an $8.7 million  charge,  principally  related to asset  writedowns  at
Pepsi  General's  joint  venture in Poland.  Foreign  currency  losses were $1.7
million in 1998,  including $1.4 million  associated with the Russia operations,
and were included in other expenses,  net.  Foreign  currency gains or losses in
1997 and 1996 were not  significant.  There were no sales  between  geographical
areas or export  sales.  Sales to any single  customer  and sales to domestic or
non-U.S.  governments  were  individually  less than ten percent of consolidated
sales.

     Equity  in  net  losses  and  net  assets  of the  Company's  international
operations amounted to $20.6 million and $95.0 million,  respectively,  in 1998,
$20.4  million and $67.9  million in 1997 and $21.3 million and $74.0 million in
1996.

     Corporate  and  other  assets  are   principally   cash  and   equivalents,
investments,  property and miscellaneous other assets,  including $91.6 million,
$92.1 million and $94.3 million of real estate investments as of fiscal year end
1998, 1997 and 1996, respectively.

17.  TRANSACTIONS WITH PEPSICO

     Pepsi General is a licensed producer and distributor of PepsiCo  carbonated
soft  drinks  and  other  non-alcoholic   beverages.   Pepsi  General  purchases
concentrate  from PepsiCo to be used in the production of these  carbonated soft
drinks and other non-alcoholic beverages.

     PepsiCo  and  Pepsi  General  share  a  business  objective  of  increasing
availability and consumption of PepsiCo's brands. Accordingly,  PepsiCo provides
Pepsi  General with  various  forms of  marketing  support to promote  PepsiCo's
brands.  This support covers a variety of  initiatives,  including  market place
support, marketing programs,  marketing equipment investment and related program
support and shared media  expense.  PepsiCo and Pepsi  General each record their
share of the cost of marketing programs in their financial statements.  Based on
the objectives of the programs and initiatives, marketing support is recorded as
an adjustment to net sales or a reduction of selling, general and administrative
expenses. Support related to marketing equipment programs is recognized when the
equipment  is  received  and placed into  service.  There are no  conditions  or
requirements  which  could  result  in the  repayment  of any  support  payments
received by Pepsi General.

     Pepsi General  manufactures and distributes  fountain products and provides
fountain  equipment  service to PepsiCo  customers  in  certain  territories  in
accordance with various agreements. There are other products which Pepsi General
produces  and/or  distributes  through  various  arrangements  with  PepsiCo  or
partners of PepsiCo.  Pepsi General  purchases  concentrate  from the Lipton Tea
Partnership and finished goods from the North American Coffee Partnership. Pepsi
General pays a royalty fee to PepsiCo for the use of the Aquafina trademark.

     The  Consolidated  Statements of Income  include the  following  income and
(expense) transactions with PepsiCo:
<TABLE>
<CAPTION>
                                                                1998           1997           1996
                                                              -------        -------        -------
<S>                                                           <C>            <C>            <C>

     Net sales                                                $  33.7        $  35.2        $  33.7
     Cost of goods sold                                        (288.3)        (266.9)        (242.5)
     Selling, general and administrative expenses                41.3           23.1           24.0
</TABLE>
<PAGE>
18.  SELECTED QUARTERLY FINANCIAL DATA
     (unaudited and in millions, except for earnings per share)
<TABLE>
<CAPTION>
                                                            First         Second         Third         Fourth        Fiscal
                                                           Quarter       Quarter        Quarter       Quarter         Year
                                                         ----------    ----------    ----------     ----------    ----------
<S>                                                      <C>           <C>           <C>            <C>           <C>

1998:
-----
Sales                                                    $    352.0    $    408.9    $    475.0     $    399.1    $  1,635.0
                                                         ----------    ----------    ----------     ----------    ----------
Gross profit                                             $    133.1    $    153.5    $    177.3     $    146.6    $    610.5
                                                         ----------    ----------    ----------     ----------    ----------
Income from continuing operations                        $      8.1    $     16.4    $     26.2     $     11.8    $     62.5
Loss from discontinued operations                              (0.5)           --            --             --          (0.5)
Extraordinary loss on early extinguishment of debt            (18.3)           --            --             --         (18.3)
                                                         ----------    ----------    ----------     ----------    ----------
Net income (loss)                                        $    (10.7)   $     16.4    $     26.2     $     11.8    $     43.7
                                                         ==========    ==========    ==========     ==========    ==========
Weighted average common shares:
  Basic                                                       101.0         101.4         101.2          100.9         101.1
  Incremental effect of stock options                           1.7           1.8           1.5            1.7           1.8
                                                         ----------    ----------    ----------     ----------    ----------
  Diluted                                                     102.7         103.2         102.7          102.6         102.9
                                                         ==========    ==========    ==========     ==========    ==========
Income (loss) per share - basic:
  Continuing operations                                  $     0.08    $     0.16    $     0.26     $     0.12    $     0.62
  Discontinued  operations                                    (0.01)           --            --             --         (0.01)
  Extraordinary loss on early extinguishment of debt          (0.18)           --            --             --         (0.18)
                                                         ----------    ----------    ----------     ----------    ----------
  Net income (loss)                                      $    (0.11)   $     0.16    $     0.26     $     0.12    $     0.43
                                                         ==========    ==========    ==========     ==========    ==========
Income (loss) per share - diluted:
  Continuing operations                                  $     0.08    $     0.16    $     0.26     $     0.12    $     0.61
  Discontinued operations                                        --            --            --             --         (0.01)
  Extraordinary loss on early extinguishment of debt          (0.18)           --            --             --         (0.18)
                                                         ----------    ----------    ----------     ----------    ----------
  Net income (loss)                                      $    (0.10)   $     0.16    $     0.26     $     0.12    $     0.42
                                                         ==========    ==========    ==========     ==========    ==========
1997:
-----
Sales                                                    $    333.5    $    392.5    $    452.9     $    378.6    $  1,557.5
                                                         ----------    ----------    ----------     ----------    ----------
Gross profit                                             $    126.7    $    148.9    $    169.8     $    139.5    $    584.9
                                                         ----------    ----------    ----------     ----------    ----------
Income (loss) from continuing operations                 $      5.8    $     11.2    $     14.1     $    (15.3)   $     15.8
Income (loss) from discontinued operations                      9.7          22.5         (47.9)           4.0         (11.7)
                                                         ----------    ----------    ----------     ----------    ----------
Net income (loss)                                        $     15.5    $     33.7    $    (33.8)    $    (11.3)   $      4.1
                                                         ==========    ==========    ==========     ==========    ==========
Weighted average common shares:
  Basic                                                       102.2         101.6         101.5          101.2         101.6
  Incremental effect of stock options                           1.1           1.1           1.3             --           1.3
                                                         ----------    ----------    ----------     ----------    ----------
  Diluted                                                     103.3         102.7         102.8          101.2         102.9
                                                         ==========    ==========    ==========     ==========    ==========
Income (loss) per share - basic:
  Continuing operations                                  $     0.06    $     0.11    $     0.14     $    (0.15)   $     0.16
  Discontinued operations                                      0.09          0.22         (0.47)          0.04         (0.12)
                                                         ----------    ----------    ----------     ----------    ----------
  Net income (loss)                                      $     0.15    $     0.33    $    (0.33)    $    (0.11)   $     0.04
                                                         ==========    ==========    ==========     ==========    ==========
Income (loss) per share - diluted:
  Continuing operations                                  $     0.06    $     0.11    $     0.14     $    (0.15)   $     0.15
  Discontinued operations                                      0.09          0.22         (0.47)          0.04         (0.11)
                                                         ----------    ----------    ----------     ----------    ----------
  Net income (loss)                                      $     0.15    $     0.33    $    (0.33)    $    (0.11)   $     0.04
                                                         ==========    ==========    ==========     ==========    ==========
</TABLE>


     The sum of  earnings  per share for the  quarters  may not equal the fiscal
year  amount due to rounding  or to changes in the  average  shares  outstanding
during the period.

     Due to the loss from  continuing  operations in the fourth quarter of 1997,
no potential  common shares were included in the  computation of average diluted
shares.  The  effect  of  potential  common  shares,   assuming  they  were  not
anti-dilutive, would have resulted in average diluted shares of 102.6 million.
<PAGE>
18.  SELECT QUARTERLY FINANCIAL DATA (continued)
     (unaudited and in millions, except for earnings per share)

     In 1997, the Company  recorded  special charges of $49.3 million related to
the restructuring of Pepsi General's organization,  the severance of essentially
all of the Whitman Corporate  management and staff, and expenses associated with
the spin-offs of Hussmann and Midas (see Note 4, Special Charges). These charges
reduced  operating  income for domestic and  international  operations  of Pepsi
General by $11.1 million and $3.7 million, respectively.
<TABLE> 
<CAPTION>
                                                                    Third              Fourth            Fiscal
                                                                   Quarter             Quarter            Year
                                                                  ----------         ----------        ----------
<S>                                                               <C>                <C>               <C>

Effect of special charges after taxes and minority interest:
     Continuing operations                                        $     (7.5)        $    (24.1)       $    (31.6)
     Discontinued operations                                           (76.0)             (17.4)            (93.4)
                                                                  ----------         ----------        ----------
     Net income                                                   $    (83.5)        $    (41.5)       $   (125.0)
                                                                  ==========         ==========        ==========
Income (loss) per share - basic:
     Continuing operations                                        $    (0.07)        $    (0.24)       $    (0.31)
     Discontinued operations                                           (0.75)             (0.17)            (0.92)
                                                                  ----------         ----------        ----------
     Net income                                                   $    (0.82)        $    (0.41)       $    (1.23)
                                                                  ==========         ==========        ==========
Income (loss) per share - diluted:
     Continuing operations                                        $    (0.07)        $    (0.24)       $    (0.31)
     Discontinued operations                                           (0.74)             (0.17)            (0.91)
                                                                  ----------         ----------        ----------
     Net income                                                   $    (0.81)        $    (0.41)       $    (1.22)
                                                                  ==========         ==========        ==========
</TABLE>

19.  PROPOSED NEW BUSINESS RELATIONSHIP WITH PEPSICO (unaudited)

     On January 25, 1999,  the Board of Directors of the Company  approved a new
business  relationship  with  PepsiCo.  As part of the  Contribution  and Merger
Agreement (the  "Agreement")  with PepsiCo and Heartland  Territories  Holdings,
Inc. ("New Whitman"), PepsiCo will contribute certain assets of several domestic
franchise  territories  to New  Whitman  and the  Company  will  merge  with New
Whitman.   Contributed  territories  include  Cleveland,   Ohio,  Dayton,  Ohio,
Indianapolis,  Indiana, St. Louis,  Missouri and southern Indiana. The Agreement
is subject to  shareholder  approval.  In addition,  the Agreement  provides for
Pepsi General to sell to PepsiCo its operations in Marion, Virginia,  Princeton,
West Virginia and the St. Petersburg area of Russia. In turn, Pepsi General will
acquire  PepsiCo's  international  operations  in Hungary,  the Czech  Republic,
Slovakia and the balance of Poland.  New Whitman will incur debt  obligations of
approximately $300 million.

     Under the  Agreement,  New Whitman  will issue 54 million  shares of common
stock to PepsiCo  and PepsiCo  will  transfer  its 20 percent  interest in Pepsi
General to New Whitman. Together with shares previously owned, PepsiCo will then
hold  approximately 38 percent of New Whitman's  common stock. In addition,  the
Agreement  requires New Whitman to repurchase up to 16 million  shares,  or $400
million of its  common  stock,  whichever  is less,  during the 12 month  period
subsequent to the close of the  transaction.  PepsiCo has agreed not to sell its
shares  into this  repurchase  program,  which would  result in PepsiCo  holding
nearly 40 percent of New  Whitman's  common stock.  Through March 23, 1999,  the
Company had  repurchased  11.6 million  shares of its common stock in 1999, at a
total  cost of $221.4  million,  in  partial  satisfaction  of this  obligation.
PepsiCo has agreed  that such  repurchases  may be used to reduce New  Whitman's
repurchase commitments.

     On March 19,  1999,  Pepsi  General  completed  the sale to  PepsiCo of the
franchises in Marion,  Virginia and Princeton,  West  Virginia.  The sale of the
franchise in Russia is expected to be completed by the end of the first  quarter
of 1999.  During the second quarter of 1999, the Company  expects to receive the
domestic  and  international  territories  it will  acquire  from  PepsiCo  upon
consummation  of the  Merger of  Whitman  and New  Whitman  contemplated  by the
Agreement.  The  transactions  will be  accounted  for by the  purchase  method.
Accordingly,  the results of operations of the  territories to be contributed by
or acquired  from PepsiCo will be included with those of New Whitman for periods
subsequent to the date of contribution/acquisition.

     See Unaudited Pro Forma Combined  Financial  Information for New Whitman on
the following pages.
<PAGE>







                                   NEW WHITMAN



               UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION



                   FOR INCLUSION IN ANNUAL REPORT ON FORM 10-K


                        FISCAL YEAR ENDED JANUARY 2, 1999



<PAGE>



                                   NEW WHITMAN

               UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

     The unaudited pro forma financial information should be read in conjunction
with the MD&A and consolidated  financial  statements and accompanying  notes of
Whitman contained elsewhere in this Form 10-K.

     The  pro  forma  combined  balance  sheet  gives  effect  to the  following
items assuming they occurred as of Whitman's fiscal year end:

     -   The sale by Pepsi General of bottling  operations and respective assets
         and  liabilities  of  the  franchise  territories  located  in  Marion,
         Virginia,  Princeton,  West Virginia,  and the St.  Petersburg  area of
         Russia to PepsiCo in exchange for $117.8 million;

     -   The  acquisition  by New  Whitman of the  bottling  operations  and the
         respective assets and liabilities of the franchise  territories located
         in Cleveland,  Ohio, Dayton,  Ohio,  Indianapolis,  Indiana, St. Louis,
         Missouri,  southern Indiana, Hungary, the Czech Republic,  Slovakia and
         the balance of Poland, known as the PepsiCo Bottling  Operations,  from
         PepsiCo for 54 million shares of New Whitman common stock, $176 million
         in cash,  $241.8  million of debt and the  transfer  of  PepsiCo's  20%
         minority interest in Pepsi General; and

     -   The  repurchase of up to 16 million  shares,  or $400 million of common
         stock, whichever is less, of Whitman/New Whitman common stock.

     The  pro  forma  combined  statement  of  operations  gives  effect  to the
following items assuming they occurred at the beginning of Whitman's 1998 fiscal
year:

     -   The sale by Pepsi General of its bottling operations and the respective
         assets and liabilities of the franchise  territories located in Marion,
         Virginia,  Princeton,  West Virginia,  and the St.  Petersburg  area of
         Russia to  PepsiCo  and  removal  of their  respective  1998  operating
         results;

     -   The acquisition by New Whitman of the PepsiCo Bottling  Operations from
         PepsiCo and the inclusion of their  respective 1998 operating  results,
         including amortization of goodwill associated with the purchase;

     -   The  recognition  of interest and debt issuance costs  associated  with
         debt incurred in the  acquisition  of the PepsiCo  Bottling  Operations
         from PepsiCo and debt incurred  related to the repurchase of 16 million
         shares of Whitman/New Whitman common stock;

     -   The elimination of interest  expense  allocated to the PepsiCo Bottling
         Operations by PepsiCo on debt that will not be assumed by New Whitman;

     -   The elimination of corporate  charges paid to PepsiCo by Pepsi General,
         which by agreement will not continue; and

     -   The elimination of PepsiCo's 20% minority interest in Pepsi General.

     The acquisition of the PepsiCo Bottling Operations territories is accounted
for under the  purchase  method.  Pro forma  earnings per share is based upon an
assumed 139.1 million shares outstanding after completing all transactions.




<PAGE>


                                   NEW WHITMAN
                        PRO FORMA COMBINED BALANCE SHEET
                           (Unaudited and in millions)
<TABLE>
<CAPTION>
                                                                           Fiscal Year End 1998
                                             -----------------------------------------------------------------------------
                                                                                PepsiCo
                                                                                Bottling
                                                             Pepsi General      Operations
                                                Whitman        Franchise        Franchise                          New
                                              Corporation     Territories      Territories     Pro Forma         Whitman
                                              As Reported       Sold (A)        Acquired      Adjustments       Pro Forma
                                             ------------    ------------     ------------    -----------     ------------
<S>                                          <C>             <C>              <C>             <C>             <C>

ASSETS:
Current assets:
     Cash and equivalents                    $    147.6      $     (1.5)      $      6.1      $     (6.1)(B)  $    146.1
     Receivables, net                             170.7            (8.8)            74.4             --            236.3
     Inventories                                   80.0            (6.8)            29.3             --            102.5
     Other current assets                          30.8            (0.9)             5.2             --             35.1
                                             ----------      ----------       ----------      ----------      ----------
       Total current assets                       429.1           (18.0)           115.0            (6.1)          520.0
                                             ----------      ----------       ----------      ----------      ----------
Investments                                       160.0              --             37.2              --           197.2
Property, net                                     499.3           (46.4)           274.0              --           726.9
Intangibles, net                                  447.0           (49.4)           370.0          (370.0)(B)
                                                                                                 1,028.7 (B)     1,426.3
Other assets                                       33.9            (1.4)             5.0              --            37.5
                                             ----------      ----------       ----------      ----------      ----------
       Total assets                          $  1,569.3      $   (115.2)      $    801.2      $    652.6      $  2,907.9
                                             ==========      ==========       ==========      ==========      ==========
LIABILITIES AND EQUITY:
Current liabilities:
     Short-term debt                         $      --       $      --        $    22.8       $    (22.8)(B)  $       --
     Other current liabilities                   233.2            (6.0)            92.9             18.7 (B)       338.8
                                             ---------       ---------        ---------       ----------      ----------
       Total current liabilities                 233.2            (6.0)           115.7             (4.1)          338.8
                                             ---------       ---------        ---------       ----------      ----------
Long-term debt                                   603.6          (115.5)              --            417.8 (B)
                                                                                                   297.7 (C)     1,203.6
Deferred income taxes                             99.1            (2.7)             9.5               --           105.9
Other liabilities                                 73.3            (0.8)            14.6               --            87.1
Minority interest                                233.7              --               --           (233.7)(B)          --
Shareholders' equity                             326.4             9.8            661.4           (661.4)(B)
                                                                                                 1,134.0 (B)
                                                                                                  (297.7)(C)     1,172.5
                                             ---------       ---------        ---------       ----------      ----------
       Total liabilities and equity          $ 1,569.3       $  (115.2)       $   801.2       $    652.6      $  2,907.9
                                             =========       =========        =========       ==========      ==========
</TABLE>

See accompanying notes to pro forma financial information.


<PAGE>


                                   NEW WHITMAN
                   PRO FORMA COMBINED STATEMENT OF OPERATIONS
               (Unaudited and in millions, except per share data)
<TABLE>
<CAPTION>

                                                                             Fiscal Year 1998
                                               ----------------------------------------------------------------------------
                                                                               PepsiCo
                                                                               Bottling
                                                              Pepsi General    Operations
                                                 Whitman        Franchise      Franchise                            New
                                               Corporation     Territories    Territories      Pro Forma          Whitman
                                               As Reported        Sold          Acquired      Adjustments        Pro Forma
                                               -----------    -----------     -----------     -----------       -----------
<S>                                            <C>            <C>             <C>             <C>               <C>

Sales                                          $   1,635.0    $     (77.5)    $     722.1     $        --       $   2,279.6
Cost of goods sold                                 1,024.5          (52.6)          440.2              --           1,412.1
                                               -----------    -----------     -----------     -----------       -----------
     Gross profit                                    610.5          (24.9)          281.9              --             867.5
Selling, general and administrative expenses         391.1          (21.7)          249.9              -- (D)         619.3
Allocated division and PepsiCo corporate
     costs                                              --             --            19.7              -- (D)          19.7
Amortization expense                                  15.6           (1.6)           14.2           (14.2)(E)
                                                                                                     25.7 (E)          39.7
                                               -----------    -----------     -----------     -----------       -----------
     Operating income (loss)                         203.8           (1.6)           (1.9)          (11.5)            188.8
Interest expense, net                                (36.1)           1.8            (4.8)          (33.4)(F)         (72.5)
Interest expense allocated by PepsiCo                   --             --           (46.1)           46.1 (G)            --
Other expense, net                                   (15.5)           2.3            (0.8)            9.2 (H)          (4.8)
                                               -----------    -----------     -----------     -----------       -----------
     Income (loss) before income taxes               152.2            2.5           (53.6)           10.4             111.5
Income taxes                                          69.7            1.1            (4.3)            8.8 (I)          75.3
                                               -----------    -----------     -----------     -----------       -----------
     Income (loss) from continuing
       operations before minority interest            82.5            1.4           (49.3)            1.6              36.2
Minority interest                                     20.0            0.3              --           (20.3)(J)            --
                                               -----------    -----------     -----------     -----------       -----------
Income (loss) from continuing operations       $      62.5    $       1.1     $     (49.3)    $      21.9       $      36.2
                                               ===========    ===========     ===========     ===========       ===========
Weighted average common shares:
Basic                                                101.1                                           38.0 (K)         139.1
Incremental effect of stock options                    1.8                                             --               1.8
                                               -----------                                    -----------       -----------
Diluted                                              102.9                                           38.0             140.9
                                               ===========                                    ===========       ===========
Income from continuing operations per share:
Basic                                          $      0.62                                                      $      0.26
Diluted                                        $      0.61                                                      $      0.26
</TABLE>

See accompanying notes to pro forma financial information.


<PAGE>


New Whitman
Notes to pro forma combined financial information

(A)  To record the sale of Pepsi  General  franchise  territories  to PepsiCo by
     removing the net assets and liabilities of the franchise  territories  sold
     and adjusting for the following:

     -   The  reduction  of  Whitman  debt by  $115.5  million,  using  the sale
         proceeds  of  $117.8  million  reduced  by  transaction  costs  of $2.3
         million, and

     -   The increase in  shareholders'  equity,  resulting from the gain on the
         sale of the franchise territories  estimated to be $9.8 million,  after
         tax.

     The  consideration  to be received  from PepsiCo is subject to  adjustments
     based  on  changes  in  the  working  capital  accounts  of  the  franchise
     territories  sold.  However,  such  adjustments  are  not  expected  to  be
     significant.  The  gain on sale  has not been  reflected  in the pro  forma
     combined statement of operations for fiscal year 1998. Instead,  the actual
     gain on sale will be recorded at the time of the sale in fiscal 1999.

(B)  To record  the  transactions  related  to the  acquisition  of the  PepsiCo
     Bottling  Operations  franchise  territories  and the minority  interest in
     Pepsi General previously held by PepsiCo, as follows (in millions):

     Acquisition costs:
       Issuance of 54 million shares of common stock                   $1,134.0
       Issuance of long-term debt                                         417.8
       Accrual of estimated transaction costs                              18.7
                                                                       --------
         Total acquisition costs                                        1,570.5
                                                                       --------
     Allocation of acquisition costs:
       Net assets of the PepsiCo Bottling Operations franchise 
         territories                                                      661.4
       Less: intangible assets of the PepsiCo Bottling Operations
         franchise territories                                           (370.0)
                                                                       --------
         Net tangible assets of the PepsiCo Bottling Operations
           franchise territories                                          291.4
       Recorded value of minority interest in Pepsi General               233.7
       Payoff by PepsiCo of short-term debt of the PepsiCo 
          Bottling Operations franchise territories                        22.8
       Less: cash balances of the PepsiCo Bottling Operations
         franchise territories                                             (6.1)
                                                                       --------
         Total allocation of acquisition costs                            541.8
                                                                       --------
     Excess of acquisition costs over recorded values of assets
       and liabilities                                                 $1,028.7
                                                                       ========
     Allocation of acquisition costs over recorded values:
       Fair value of property in excess of its recorded value, net     $      *
       Intangible assets                                                      *
                                                                       --------
         Total allocation of acquisition costs over recorded values    $1,028.7
                                                                       ========

*    The preliminary allocation of the excess acquisition costs will be recorded
     upon the completion of the  preliminary  appraisals of property,  plant and
     equipment that are currently in process.

     Additional  information about the acquisition costs and allocation of those
     costs is as follows:

     -   The shares to be issued by New  Whitman  were  valued at $21 per share,
         based on the average  closing  market price of Whitman  common stock as
         reported  on the New York  Stock  Exchange  during the three day period
         immediately  before and after the January 25, 1999  announcement of the
         agreement between Whitman and PepsiCo.

     -   The  long-term  debt  will be used to  make a cash  payment  of  $176.0
         million  to  PepsiCo  payable  when the  transactions  are  closed  and
         subsequent payments to PepsiCo of $241.8 million.

     -   The portion of the excess  purchase cost allocated to property is based
         on preliminary appraisals. The allocation is subject to refinement when
         the final  appraisals are completed after the  transactions are closed.
         The  Company  anticipates  that the final  appraisals  will not  differ
         significantly from the preliminary appraisals.

     -   The  remainder  of the  excess  purchase  cost  has been  allocated  to
         intangibles,  which are comprised of the franchise  rights acquired and
         goodwill.  No portion of the excess purchase cost has been allocated to
         the other assets acquired or liabilities  assumed. The Company believes
         that the fair  values  of  those  other  assets  and  liabilities  will
         approximate their carrying values.

     -   The consideration to be paid to PepsiCo is subject to adjustments based
         on changes in the working  capital  accounts  of the  PepsiCo  Bottling
         Operations  franchise  territories.  However,  such adjustments are not
         expected to be significant.

(C)  To record the  repurchase of 16 million shares of New Whitman common stock,
     pursuant to the  agreement,  and to record the  issuance of debt to finance
     the repurchase (in millions):

     Repurchase of 11.6 million shares through March 23, 1999          $  221.4
     Subsequent repurchases of 4.4 million shares                          76.3
                                                                       --------
       Debt issued to fund repurchases                                 $  297.7
                                                                       ========

     The  repurchase  cost of the 4.4  million  shares  is based  on an  assumed
     average price of $17.35 per share,  which approximates the average price of
     the shares  repurchased in the five days preceding and including  March 23,
     1999. An increase or decrease in the repurchase cost of $1 per share on the
     remaining 4.4 million shares would change the amount of debt issued to fund
     repurchases  by $4.4  million.  The change in debt  would  change pro forma
     interest  expense by $0.3 million on an annual basis or $0.2 million  after
     tax.

(D)  Adjustments have not been made to give effect to the potential reduction in
     administrative expenses that may be realized by New Whitman due to facility
     consolidations  and other cost savings  initiatives,  because the amount of
     such potential savings cannot be estimated.

(E)  To reflect the amortization of intangible  assets  acquired,  the following
     entries were made:

     -   The  elimination of the  amortization  expense  recorded by the PepsiCo
         Bottling Operations franchise territories.

     -   The recording of the  amortization  expense on the intangible  asset of
         $1,028.7 million,  related to the PepsiCo Bottling Operations franchise
         territories, using a forty-year amortization period.

(F)  To record the net increase in interest expense based on the net increase in
     long-term debt, as follows (in millions):
<TABLE>
<CAPTION>
<S>                                                                                 <C>

     Debt incurred by New Whitman to fund payments to PepsiCo (Note B)              $     417.8
     Debt incurred for share repurchases (Note C)                                         297.7
     Less: proceeds from sales of Pepsi General franchise territories (Note A)           (115.5)
                                                                                    -----------
       Net increase in long-term debt                                               $     600.0
                                                                                    ===========
     Interest at an assumed rate of 6.0%                                            $      36.0
     Amortization of debt issuance costs                                                    0.4
                                                                                    -----------
       Total additional interest                                                           36.4
     Plus:  external interest expense recorded by franchise territories sold                1.8
     Less:  elimination of external interest expense recorded by the PepsiCo
       Bottling Operations                                                                 (4.8)
                                                                                    -----------
       Pro forma adjustment of interest expense                                     $      33.4
                                                                                    ===========
</TABLE>

     A change in the interest  rate of 1/8 of a percentage  point would have the
     effect of changing interest expense $0.8 million or $0.5 million after tax.

(G)  To  eliminate  the  interest  expense  allocated  by PepsiCo to the PepsiCo
     Bottling  Operations.  The  underlying  debt  will  not be  assumed  by New
     Whitman.

(H)  To eliminate the corporate charge paid by Pepsi General to PepsiCo. Whitman
     and PepsiCo have agreed to terminate this charge once the  transactions are
     closed.

(I)  To record the estimated tax impact of the pro forma  adjustments,  using an
     incremental tax rate of 40%, determined as follows:

     Pretax income of pro forma adjustments                        $  10.4
     Plus: non-deductible intangible amortization                     11.5
                                                                   -------
       Total                                                          21.9
     Incremental tax rate                                          x    40%
                                                                   -------
     Pro forma tax adjustment                                      $   8.8
                                                                   =======

(J)  To  eliminate  PepsiCo's  20%  minority  interest in the  earnings of Pepsi
     General, due to the transfer of that minority interest to New Whitman.

(K)  To record the net increase in weighted  average common shares  outstanding,
     giving effect to the issuance of 54 million shares to PepsiCo (Note B) less
     the 16 million shares to be acquired under the share repurchase  commitment
     (Note C).

     EBITDA is  defined as income  (loss)  before  income  taxes plus the sum of
interest, depreciation and amortization.  Information concerning EBITDA has been
included  below  because it is  expected  to be used by certain  investors  as a
measure  of  operating  performance  and a measure  of the  ability  to  service
potential debt. EBITDA is not required by GAAP and,  accordingly,  should not be
considered an  alternative  to income (loss) from  continuing  operations or any
other measure of performance  required by GAAP.  Additionally,  it should not be
used as a measure of cash flow or liquidity  under GAAP.  Following is a summary
of historical and pro forma EBITDA,  and  depreciation and amortization for 1998
(in millions):


                                                                 Depreciation
                                                    EBITDA     and Amortization
                                                    ------     ----------------

Whitman Corporation as reported                     $266.0          $ 77.7
Pepsi General franchise territories sold              (5.3)           (6.0)
PepsiCo Bottling Operations franchise territories     62.1            64.8
Pro forma adjustments                                 15.2            17.5
                                                    ------          ------
New Whitman - pro forma basis                       $338.0          $154.0
                                                    ======          ======


<PAGE>









                      WHITMAN CORPORATION AND SUBSIDIARIES

                             ----------------------

                                    EXHIBITS


                   FOR INCLUSION IN ANNUAL REPORT ON FORM 10-K

                        FISCAL YEAR ENDED JANUARY 2, 1999



<PAGE>
                                  EXHIBIT INDEX

Exhibit
  No.    Description of Exhibit
-------  ----------------------  

(3)a#    Certificate   of   Incorporation   as  Restated  April  30,  1987,  and
         subsequently amended through June 24, 1992.
(3)b+    By-Laws, as amended September 20, 1996.
(4)#     Indenture dated as of January 15, 1993, between Whitman Corporation and
         The First  National  Bank of  Chicago,  Trustee.  The  Registrant  will
         furnish to the Securities and Exchange Commission, upon request, copies
         of the forms of the debt  securities  issued from time to time pursuant
         to the Indenture dated as of January 15, 1993.
(10)a#   **1982 Stock Option,  Restricted Stock Award and Performance Award Plan
         (as amended through June 16, 1989).
(10)b#   **Amendment  No. 2 to 1982 Stock  Option,  Restricted  Stock  Award and
         Performance Award Plan made as of September 1, 1992.
(10)c#   **Form of Nonqualified Stock Option Agreement.
(10)d#   **Amendment   to  1982  Stock  Option,   Restricted   Stock  Award  and
         Performance Award Plan made as of February 19, 1993.
(10)e@   **Form of Change in Control Agreement dated November 17, 1995.
(10)g#   **Management Incentive Compensation Plan.
(10)h#   **Long Term Performance Compensation Program.
(10)i~   **Whitman   Corporation  Executive  Retirement  Plan,  as  Amended  and
         Restated Effective January 1, 1998.
(10)j~   **Pepsi-Cola  General  Bottlers,  Inc.  Executive  Retirement  Plan, as
         Amended and Restated Effective January 1, 1998.
(10)k#   **Deferred  Compensation  Plan for Directors,  as Amended  November 18,
         1988.
(10)l+   **Amendment to Stock Incentive Plan dated September 20, 1996.
(10)m*   **Form of Restricted Stock Award Agreement.
(10)n~   **Revised Stock Incentive Plan (adopted November 21, 1997).
(10)o    **Form of Change in Control Agreement dated December, 1997.
(12)     Statement of Calculation of Ratio of Earnings to Fixed Charges.
(21)     Subsidiaries of the Registrant.
(23)     Consent of Independent Auditors.
(24)     Powers of Attorney.
(27)     Financial Data Schedule.

        Exhibit Reference Explanations

**       Exhibit   constitutes  a  management  contract  or  compensatory  plan,
         contract or arrangement  described  under Item 601(b) (10) (iii) (A) of
         Regulation S-K.
#        Incorporated  by reference to the  Registrant's  Annual  Report on Form
         10-K for the year ended  December 31, 1992 under the indicated  Exhibit
         number.
*        Incorporated  by reference to the  Registrant's  Annual  Report on Form
         10-K for the year ended  December 31, 1993 under the indicated  Exhibit
         number.
&        Incorporated  by reference to the  Registrant's  Annual  Report on Form
         10-K for the year ended  December 31, 1994 under the indicated  Exhibit
         number.
@        Incorporated  by reference to the  Registrant's  Annual  Report on Form
         10-K for the year ended  December 31, 1995 under the indicated  Exhibit
         number.
+        Incorporated by reference to the Registrant's  Quarterly Report on Form
         10-Q for the  quarter  ended  September  30,  1996 under the  indicated
         Exhibit number.

~        Incorporated  by reference to the  Registrant's  Annual  Report on Form
         10-K for the year ended  December 31, 1997 under the indicated  Exhibit
         number.